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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 3, 1998
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REGISTRATION NO. 333-59613
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
SIMONDS INDUSTRIES INC.
(Exact Name of Registrant as Specified in its Charter)
DELAWARE 5995 05-0484518
(State or Other (Primary Standard (I.R.S. Employer
Jurisdiction of Incorporation Industrial Classification Identification No.)
or Organization) Code Number)
135 INTERVALE ROAD
FITCHBURG, MASSACHUSETTS 01420
(978) 343-3731
(Address, Including Zip Code, and Telephone Number, Including Area Code, of
Registrant's Principal Executive Offices)
CHRISTINE M. MARX
EDWARDS & ANGELL
150 JOHN F. KENNEDY PARKWAY
SHORT HILLS, NEW JERSEY 07078
(973) 376-7700
(Address, Including Zip Code, and Telephone Number, Including Area Code, of
Agent for Service)
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]____________
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]____________
<TABLE>
<CAPTION>
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PROPOSED
MAXIMUM
AMOUNT OFFERING AMOUNT OF
TITLE OF EACH CLASS OF TO BE PRICE REGISTRATION
SECURITIES TO BE REGISTERED REGISTERED PER UNIT FEE
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<S> <C> <C> <C>
10 1/4% Senior Subordinated Notes due 2008..................... $100,000,000 100% $29,500
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Guarantee of Notes of Armstrong Manufacturing Company, Inc..... -- -- --
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Guarantee of Notes of Simonds Holding Company, Inc............. -- -- --
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Guarantee of Notes of Simonds Industries FSC, Inc.............. -- -- --
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</TABLE>
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933, OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
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THIS PROSPECTUS AND THE INFORMATION CONTAINED HEREIN ARE SUBJECT TO COMPLETION
OR AMENDMENT. UNDER NO CIRCUMSTANCES SHALL THIS PROSPECTUS CONSTITUTE AN OFFER
TO SELL OR THE SOLICITATION OF AN OFFER TO BUY. SUBJECT TO COMPLETION, DATED
SEPTEMBER 3, 1998
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PROSPECTUS
SIMONDS INDUSTRIES INC.
[LOGO]
OFFER TO EXCHANGE ITS
10 1/4% SENIOR SUBORDINATED NOTES DUE JULY 1, 2008,
WHICH HAVE BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED,
FOR AN EQUAL PRINCIPAL AMOUNT OF ITS
10 1/4% SENIOR SUBORDINATED NOTES DUE JULY 1, 2008,
WHICH HAVE NOT BEEN SO REGISTERED
THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS THEREUNDER WILL EXPIRE AT
5:00 P.M. NEW YORK CITY TIME, ON , 1998, UNLESS EXTENDED
Simonds Industries Inc., a Delaware corporation ("Simonds" or the
"Company"), hereby offers, upon the terms and subject to the conditions set
forth in this Prospectus and the accompanying Letter of Transmittal (which
together constitute the "Exchange Offer"), to exchange an aggregate principal
amount of up to $100,000,000 of its 10 1/4% Senior Subordinated Notes due 2008
(the "Exchange Notes"), which have been registered under the Securities Act of
1933, as amended (the "Securities Act"), for a like principal amount of its
outstanding 10 1/4% Senior Subordinated Notes due 2008 (the "Original Notes"
and, together with the Exchange Notes, the "Notes"), which have not been so
registered, from the holders thereof. The terms of the Exchange Notes are
identical in all material respects to the Original Notes, except for certain
transfer restrictions and registration rights relating to the Original Notes.
The Company will accept for exchange any and all Original Notes validly
tendered and not withdrawn prior to 5:00 p.m., New York City time, on
,1998, unless extended (as so extended, the "Expiration Date"). Tenders
of Original Notes may be withdrawn at any time prior to the Expiration Date. The
Exchange Offer is not conditioned upon any minimum principal amount of Original
Notes being tendered for exchange pursuant to the Exchange Offer. Pursuant to
the Registration Agreement (as defined), the Exchange Offer will remain open for
not less than 30 days (or longer if required by applicable law) after the date
hereof. The Exchange Offer is subject to certain other customary conditions. See
"The Exchange Offer."
Interest on the Exchange Notes will be payable semi-annually on January 1
and July 1 of each year, commencing January 1, 1999. The Exchange Notes are
subject to redemption on or after July 1, 2003, at the option of the Company, in
whole or in part, at the redemption prices set forth herein, plus accrued and
unpaid interest to the date of redemption. In addition, prior to July 1, 2001,
the Company may, at its option, redeem up to an aggregate of 35% of the original
principal amount of the Notes issued with the net proceeds from one or more
Public Equity Offerings (as defined) at the redemption price set forth herein
plus accrued and unpaid interest to the date of redemption; provided that at
least 65% of the Notes issued remain outstanding immediately after giving effect
to any such redemption. In the event of a Change of Control (as defined), the
Company will be obligated to make an offer to purchase all of the outstanding
Notes at a purchase price equal to 101% of the principal amount thereof plus
accrued and unpaid interest to the date of purchase. In addition, the Company
will be obligated to make an offer to purchase Notes in the event of certain
asset sales. See "Description of Exchange Notes."
The Exchange Notes will be general unsecured obligations of the Company
ranking subordinate in right of payment to all existing and future Senior
Indebtedness (as defined) of the Company. The Exchange Notes will be
unconditionally guaranteed (the "Guarantees"), on a senior subordinated basis,
jointly and severally, by each of the Company's Domestic Wholly Owned Restricted
Subsidiary (as defined) (the "Guarantors"). The Guarantee of each Guarantor will
be subordinate in right of payment to all Guarantor Senior Debt (as defined) of
such Guarantor. As of June 27, 1998, on a pro forma basis, the Company and the
Guarantors would have had no Senior Debt or Guarantor Senior Debt outstanding.
In addition, the Exchange Notes will be effectively subordinated in right of
payment to all liabilities, including indebtedness, of subsidiaries of the
Company which are not Guarantors. As of June 27, 1998, on a pro forma basis,
such subsidiaries would have had $14.4 million of total liabilities, including
approximately $6.5 million of indebtedness.
The Exchange Notes are being offered hereunder in order to satisfy certain
obligations of the Company contained in the Registration Rights Agreement dated
July 7, 1998 (the "Registration Rights Agreement"), among the Company and the
other signatories thereto. The Company believes that based on interpretations by
the staff of the Securities and Exchange Commission (the "SEC"), Exchange Notes
issued pursuant to the Exchange Offer in exchange for Original Notes may be
offered for resale, resold and otherwise transferred by each holder thereof
(other than any holder which is an "affiliate" of the Company within the meaning
of Rule 405 under the Securities Act) without compliance with the registration
and prospectus delivery requirements of the Securities Act, provided that such
Exchange Notes are acquired in the ordinary course of such holder's business and
such holder has no arrangement with any person to participate in the
distribution of such Exchange Notes.
Each broker-dealer that receives Exchange Notes for its own account pursuant
to the Exchange Offer must acknowledge that it will deliver a prospectus in
connection with any resale of such Exchange Notes. The Letter of Transmittal
states that by so acknowledging and by delivering a prospectus, a broker-dealer
will not be deemed to admit that it is an "underwriter" within the meaning of
the Securities Act. This Prospectus, as it may be amended or supplemented from
time to time, may be used by a broker-dealer in connection with resales of
Exchange Notes received in exchange for Original Notes where such Original Notes
were acquired by such broker-dealer as a result of market-making activities or
other trading activities. The Company has agreed that, starting on the
Expiration Date and ending on the close of business on the ninetieth day after
the Expiration Date, it will make this Prospectus available to any broker-dealer
for use in connection with any such resale. See "Plan of Distribution."
The Company will not receive any proceeds from the Exchange Offer and will
pay all expenses incident to the Exchange Offer.
SEE "RISK FACTORS" BEGINNING ON PAGE 11 FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED IN CONNECTION WITH AN INVESTMENT IN THE EXCHANGE
NOTES.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The date of this Prospectus is , 1998.
<PAGE> 3
The Exchange Offer is not being made to, nor will the Company accept
surrenders for exchange from, holders of Original Notes in any jurisdiction in
which such Exchange Offer or the acceptance thereof would not be in compliance
with the securities or blue sky laws of such jurisdiction.
The Exchange Notes will be available initially only in book-entry form. The
Company expects that the Exchange Notes issued pursuant to this Exchange Offer
will be issued in the form of a Global Exchange Note (as defined), which will be
deposited with, or on behalf of, The Depository Trust Company (the "Depositary")
and registered in its name or in the name of Cede & Co., its nominee. Beneficial
interests in the Global Exchange Note representing the Exchange Notes will be
shown on, and transfers thereof will be effected through, records maintained by
the Depositary and its participants. After the initial issuance of the Global
Exchange Note, Exchange Notes in certificated form will be issued in exchange
for interests in the Global Exchange Note only on the terms set forth in the
Indenture dated as of July 7, 1998 (the "Indenture") among the Company, the
Guarantors and State Street Bank and Trust Company, as trustee (the "Trustee").
See "Description of Exchange Notes -- Book-Entry Transfer."
Prior to this Exchange Offer, there has been no public market for the
Original Notes. To the extent that Original Notes are tendered and accepted in
the Exchange Offer, a holder's ability to sell untendered Original Notes could
be adversely affected. If a market for the Exchange Notes should develop, the
Exchange Notes could trade at a discount from their face value. The Company does
not currently intend to list the Exchange Notes on any securities exchange or to
seek approval for quotation through any automated quotation system.
Neither the Company nor any of its subsidiaries will receive any cash
proceeds from the issuance of the Exchange Notes offered hereby. No
dealer-manager is being used in connection with this Exchange Offer. See "Use of
Proceeds" and "Plan of Distribution."
THIS PROSPECTUS AND THE RELATED LETTER OF TRANSMITTAL CONTAIN IMPORTANT
INFORMATION. HOLDERS OF ORIGINAL NOTES ARE URGED TO READ THIS PROSPECTUS AND THE
RELATED LETTER OF TRANSMITTAL CAREFULLY BEFORE DECIDING WHETHER TO TENDER THEIR
ORIGINAL NOTES PURSUANT TO THE EXCHANGE OFFER.
DISCLOSURE REGARDING FORWARD LOOKING STATEMENTS
WHEN USED IN THIS PROSPECTUS, THE WORDS "BELIEVES," "EXPECTS,"
"ANTICIPATES" AND SIMILAR EXPRESSIONS ARE USED TO IDENTIFY FORWARD LOOKING
STATEMENTS. SUCH STATEMENTS ARE SUBJECT TO RISKS AND UNCERTAINTIES WHICH COULD
CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE PROJECTED. THE COMPANY
WISHES TO CAUTION READERS THAT ALL STATEMENTS OTHER THAN STATEMENTS OF
HISTORICAL FACTS INCLUDED IN THIS PROSPECTUS, INCLUDING, WITHOUT LIMITATION,
CERTAIN STATEMENTS UNDER "SUMMARY," "USE OF PROCEEDS," "SELECTED PRO FORMA
FINANCIAL DATA," "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS" AND "BUSINESS" AND LOCATED ELSEWHERE HEREIN REGARDING
THE COMPANY'S FINANCIAL POSITION AND BUSINESS STRATEGY, MAY CONSTITUTE FORWARD
LOOKING STATEMENTS. ALL OF THESE FORWARD LOOKING STATEMENTS ARE BASED ON
ESTIMATES AND ASSUMPTIONS MADE BY MANAGEMENT OF THE COMPANY, WHICH ALTHOUGH
BELIEVED TO BE REASONABLE, ARE INHERENTLY UNCERTAIN. THEREFORE, UNDUE RELIANCE
SHOULD NOT BE PLACED ON SUCH ESTIMATES AND STATEMENTS. NO ASSURANCE CAN BE GIVEN
THAT ANY OF SUCH ESTIMATES OR STATEMENTS WILL BE REALIZED AND IT IS LIKELY THAT
ACTUAL RESULTS WILL DIFFER MATERIALLY FROM THOSE CONTEMPLATED BY SUCH FORWARD
LOOKING STATEMENTS. FACTORS THAT MAY CAUSE SUCH DIFFERENCES INCLUDE: (1)
INCREASED COMPETITION; (2) INCREASED COSTS; (3) LOSS OR DISRUPTION ON SUPPLY
SOURCES OF SPECIALTY STEELS; (4) LOSS OR RETIREMENT OF KEY MEMBERS OF
MANAGEMENT; (5) INCREASES IN THE COMPANY'S COST OF BORROWINGS OR UNAVAILABILITY
OF ADDITIONAL DEBT OR EQUITY CAPITAL ON TERMS CONSIDERED REASONABLE BY
MANAGEMENT; (6) ADVERSE STATE, FEDERAL OR FOREIGN
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LEGISLATION OR REGULATION OR ADVERSE DETERMINATIONS BY REGULATORS; AND (7)
CHANGES IN GENERAL ECONOMIC CONDITIONS IN THE MARKETS IN WHICH THE COMPANY MAY
COMPETE AND FLUCTUATIONS IN DEMAND IN THE METAL PROCESSING AND PRIMARY WOOD
INDUSTRIES. MANY OF SUCH FACTORS WILL BE BEYOND THE CONTROL OF THE COMPANY AND
ITS MANAGEMENT. FOR FURTHER INFORMATION OR OTHER FACTORS WHICH COULD AFFECT THE
FINANCIAL RESULTS OF THE COMPANY AND SUCH FORWARD LOOKING STATEMENTS, SEE "RISK
FACTORS."
AVAILABLE INFORMATION
The Company has filed a registration statement on Form S-4 (herein referred
to, together with all exhibits and schedules thereto and any amendments thereto,
as the "Exchange Offer Registration Statement") under the Securities Act with
respect to the Exchange Notes offered hereby. This Prospectus, which forms a
part of the Exchange Offer Registration Statement, does not contain all of the
information set forth in the Exchange Offer Registration Statement, certain
parts of which are omitted in accordance with the rules and regulations of the
SEC. For further information with respect to the Company and the Exchange Notes
offered hereby, reference is made to the Exchange Offer Registration Statement.
Statements made in this Prospectus as to the contents of certain documents are
not necessarily complete and, in each instance, reference is made to the copy of
the document filed as an exhibit to the Exchange Offer Registration Statement.
The Company is not currently subject to the periodic reporting and other
informational requirements of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"). Pursuant to the Indenture, the Company has agreed that,
until such time as the Company shall become subject to the reporting
requirements of Section 13 or 15(d) of the Exchange Act, (a) the Company shall
file with the SEC and provide to the Trustee, the Initial Purchasers (as
defined) and holders of Notes such annual reports and such information,
documents and other reports to be filed with the SEC pursuant to Sections 13 and
15(d) of the Exchange Act, whether or not the Company is subject to such filing
requirements so long as the SEC will accept such filings, and (b) the Company
shall provide to the Trustee and the holders of the Notes, and make available to
prospective purchasers of Notes, securities analysts and broker-dealers upon
request, consolidated financial statements comparable to those required to
appear in annual or quarterly reports. In addition, for so long as any of the
Original Notes remain outstanding, the Company has agreed to make available to
any prospective purchaser of the Original Notes or beneficial owner of the
Original Notes in connection with any sale thereof the information required by
Rule 144A(d)(4) under the Securities Act.
Any reports or documents filed by Simonds with the SEC (including the
Exchange Offer Registration Statement) may be inspected and copied at the Public
Reference Section of the SEC's office at Room 1024, 450 Fifth Street, N.W.,
Washington, D.C. 20549, and at the SEC's regional offices in New York (7 World
Trade Center, 13th Floor, New York, New York 10048) and Chicago (Citicorp
Center, 14th Floor, 500 West Madison Street, Chicago, Illinois 60661). Copies of
such reports or other documents may be obtained at prescribed rates from the
Public Reference Section of the SEC at 450 Fifth Street, N.W., Washington, D.C.
20549. In addition, the SEC maintains a web site that contains reports and other
information that is filed through the SEC's Electronic Data Gathering Analysis
and Retrieval System. The web site can be accessed at http://www.sec.gov.
ii
<PAGE> 5
SUMMARY
The following summary is qualified in its entirety by, and should be read
in conjunction with, the more detailed information and financial data, including
the consolidated financial statements and notes thereto, appearing elsewhere in
this Prospectus. Unless otherwise indicated, references to the "Company" are to
Simonds Industries Inc. and its wholly owned subsidiaries. References herein to
various financial information on a "pro forma basis" (i) give effect to the
acquisitions of Armstrong Manufacturing Company ("Armstrong") and W. Notting
Limited ("Notting") as if such transactions had been completed as of the first
day of the related period and (ii) reflect certain adjustments described in
"Selected Pro Forma Financial Data." This Prospectus includes product names and
trademarks of the Company and of other organizations.
THE COMPANY
GENERAL
Simonds, with operations since 1832, is a leading global manufacturer and
marketer of high quality industrial cutting tools. With facilities in North
America and Europe, the Company sells its products into three distinct end user
markets: metal (49% of 1997 net sales on a pro forma basis), wood (40%), and
paper (11%). Management believes the Company holds a number one, two or three
share position in each of the markets it serves. For the twelve months ended
June 27, 1998, net sales and EBITDA (as defined) were $131.4 million and $19.5
million, respectively, on a pro forma basis.
The Company manufactures saw blades, files, knives and steel rule that,
when mounted on industrial machinery, cut, shape, bend and perforate metal, wood
and paper. In addition, the Company manufactures and distributes machinery,
including a complete line of filing room equipment used primarily in saw mills.
Management believes that Simonds manufactures and markets the most
technologically advanced industrial cutting tools available in the industry. The
Company's more than 25,000 products are used in a wide variety of industrial
applications. End users of Simonds' products range from large companies such as
General Motors Corp. and Georgia Pacific Corp. to small businesses such as
machine shops. The primary end users of the Company's metal cutting tools
include aerospace, automotive, construction and home appliance manufacturers as
well as steel service centers, forge shops and aluminum foundries. The Company's
wood cutting products are used in saw mills, pulp and paper mills, furniture
manufacturing facilities and wood chipping operations. Steel rule products
produced by the Company are used in the die making and packaging industries. The
products are consumable and require replacement many times per year. More than
85% of the Company's net sales are derived from sales of replacement products
for use in the aftermarket. In addition, despite the significant value added by
the Company's products in the processes in which they are used, these products
add relatively little cost to end users' operations. These factors have
contributed to the Company's historically stable revenue stream.
Management believes that as a result of its long and successful history,
Simonds has been able to create a loyal, knowledgeable and efficient
distribution base. A substantial majority of the Company's products are marketed
and sold to end users in each of its market segments worldwide through
approximately 7,000 independent distributors. This distribution base provides
the Company with a competitive advantage by allowing the Company to more easily
sell its broad range of products, including new and sophisticated tools. In
addition, through its independent distributors the Company is able to offer end
users the highest quality customer service, including the resharpening and
maintenance of its cutting tools. The Company complements its distribution base
with a service oriented, highly trained and experienced sales force who spend
most of their time with end users. The Company sells its products directly to
over 12,000 distributors and end users with no single customer representing more
than 2.1% of total net sales for 1997.
Simonds' products are marketed and sold worldwide in 92 countries through
facilities located in the United States, Canada, Germany, Spain and the United
Kingdom. The Company has expanded its product sales outside of North America
from 15% of net sales in 1991 to 24% in 1997 on a pro forma basis through
acquisitions and internal growth. The Company intends to continue its
international growth by broadening its
1
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product offerings in existing markets and entering new geographic areas. For the
year ended December 27, 1997, the Company's net sales in the United States,
Canada, Europe and the rest of the world represented approximately 62%, 14%, 17%
and 7% of total Company net sales, respectively, on a pro forma basis.
Simonds benefits from an experienced management team with a demonstrated
track record of successfully implementing the Company's business strategy. The
senior management team averages more than 20 years of industry experience.
Management believes that this experience, in combination with the Company's 166
year history and superior product quality, has made Simonds a widely recognized
brand name among its target customer base.
BUSINESS STRATEGY
Management believes that Simonds is well positioned to maintain its current
leadership position within the cutting tool industry. The Company's strategic
objective is to continue to design, manufacture and sell superior cutting tools
and equipment while leveraging its metallurgy and tooth edge geometry expertise.
The Company focuses on end user markets where high product performance is valued
and in geographic markets with a developed and large industrial base. The
Company's objective is to continue to grow its sales and expand its operating
margins by pursuing the following business strategy:
Continued Margin Expansion Through Focus on Profitability. The Company's
culture and organization focuses on consistently improving profitability. The
Company's compensation structure creates incentives for all personnel to focus
on profit margins. In each of the manufacturing facilities, all levels of
employees from machine operators through plant managers receive bonuses tied to
the profitability or productivity of their particular facility. The Company's
corporate sales management and sales force receive incentive compensation based
on achieving specific profit margins as well as sales targets. Senior
management's incentive compensation is based on targeted levels of the Company's
profitability. As a result of this cultural focus and emphasis on profitability,
Simonds' EBITDA margin has grown from 10.4% of net sales in 1990 to 15.2% of net
sales in 1997.
Strategic Acquisitions. The Company intends to continue to pursue
strategic acquisitions in the highly fragmented industrial cutting tool
industry. Management believes that there are many attractive potential
acquisition targets both domestically and internationally. Since 1989, the
Company has completed eight acquisitions as described in the following table.
<TABLE>
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MARKET YEAR
ENTITY ACQUIRED SEGMENT PRODUCT TYPE LOCATIONS ACQUIRED
--------------- ------- ----------------------- --------------------- --------
<S> <C> <C> <C> <C>
Michigan Knife Company Wood - Industrial Knives North America 1989
- Circular Saws
Mainland Manufacturing Inc. Wood - Wide Band Saws Western Canada 1990
- Circular Saws
- Filing Room Equipment
A.H. Ralston Limited Metal - Industrial Files United Kingdom 1990
Wespa Metallsagenfabrik-Lorenz Weisel
KG ("Wespa") Metal - Band Saws Germany 1992
- Hack Saws
Strongridge Limited ("Strongridge") Metal - Sales & Marketing North America 1996
Product line of Pacific Hoe Company Wood - Bits and Shanks -- 1997
Armstrong Wood - Filing Room Equipment United States 1997
Notting Paper - Steel Rule Europe, North America 1998
</TABLE>
Each of these acquisitions has provided significant strategic opportunities for
the Company by either expanding product offerings or geographic markets in which
these products are sold. For example, Notting expanded the Company's steel rule
product line, Armstrong expanded the Company's filing room equipment machinery,
Strongridge provided access to smaller distributors, and Wespa further developed
the metal band product line. The Company is presently evaluating certain
acquisition opportunities and as part of its strategy will continue to do so in
the future. There can be no assurance that the Company will consummate any such
acquisitions or, if consummated, the timing thereof.
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Emphasis on Product Innovation. Management believes that the Company is a
leader in the development of innovative and technologically superior products.
Throughout its history, the Company has often been first to introduce new
product technologies, including bits and shanks, carbide tipped band saws,
circular and band levelers, band tensioners, computerized saw control and narrow
wood band technology. An even greater emphasis on product innovation was
initiated in 1996 with the creation of a staff level position devoted to product
development. Recent new products include (i) "Epic(R)," a state-of-the-art metal
band saw line; (ii) automated band saws and circular saw levelers, revolutionary
products which allow for automated tensioning and leveling of band saws and
circular saws; (iii) "Red Streak(R)," a premier product for portable saw mill
use that enables users to cut lumber in the forest, resulting in lower operating
expenses; and (iv) "Dominator(R)," carbide tip bits which last significantly
longer than high speed steel bits. Management estimates that the Company
introduces approximately 10 to 25 new product innovations annually. New product
innovations are important to the Company's independent distributors, providing
them with the ability to expand their product lines, the opportunity to improve
their margins and the ability to offer their customers enhanced products.
Low Cost Manufacturing. The Company continues to focus on being a low cost
producer of high value-added products within the cutting tool industry. The
Company has continued to benefit from economies of scale in both purchasing and
manufacturing. Management believes that the Company is able to purchase
specialty steel, its primary raw material, more efficiently than many of its
smaller competitors, generating significant savings. The Company has reduced its
manufacturing costs and improved its consistency of product quality as a result
of capital investment and process control programs. Capital investment of more
than $10 million since 1995 in new and upgraded equipment such as electron beam
welding, milling equipment, grinding equipment, heat treating equipment, and
in-line process controls has resulted in productivity and quality gains. The
Company's Fitchburg and Newcomerstown facilities received ISO 9002 certification
in 1993 and 1997, respectively. As a measure of improved efficiency, the
Company's sales per employee has increased from approximately $87,000 in 1989 to
approximately $151,000 in 1997.
COMPANY HISTORY
The Company has been in continuous operation selling cutting tools with
headquarters in Fitchburg, Massachusetts since 1832. The Company originally
manufactured agricultural cutting tools, evolving into an industry leader in the
development of industrial cutting tools for metal, wood and paper. In 1995, the
Company was acquired by Fleet Venture Resources, Inc. and certain of its
affiliates ("Fleet") and management. The Company is incorporated in Delaware and
maintains its principal executive offices at 135 Intervale Road, Fitchburg,
Massachusetts 01420. Its phone number is (978) 343-3731.
On July 7, 1998, the Company consummated the sale of the Original Notes in
a transaction exempt from the registration requirements of the Securities Act
(the "Original Offering").
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<PAGE> 8
THE EXCHANGE OFFER
The Exchange Offer............ Up to $100,000,000 aggregate principal amount
of Exchange Notes are being offered in exchange
for a like aggregate principal amount of
Original Notes. The Company is making the
Exchange Offer in order to satisfy its
obligations under the Registration Rights
Agreement relating to the Original Notes. For a
description of the procedures for tendering
Original Notes, see "The Exchange Offer --
Procedures for Tendering."
Expiration Date............... 5:00 p.m., New York City time, on ,
1998, unless the Exchange Offer is extended (in
which case the Expiration Date will be the
latest date and time to which the Exchange
Offer is extended). See "The Exchange Offer --
Terms of the Exchange Offer."
Conditions of the Exchange
Offer........................ The Exchange Offer is subject to the condition
that the Exchange Offer does not violate
applicable law or SEC staff interpretation. If
the Company determines that the Exchange Offer
is not permitted by applicable federal law, it
may terminate the Exchange Offer. The Exchange
Offer is not conditioned upon any minimum
principal amount of Original Notes being
tendered. See "The Exchange Offer -- Conditions
of the Exchange Offer."
Resale of the Exchange
Notes........................ Based on an interpretation by the staff of the
SEC set forth in no-action letters issued to
third parties, the Company believes that
Exchange Notes issued pursuant to the Exchange
Offer in exchange for Original Notes may be
offered for resale, resold and otherwise
transferred by any holder thereof (other than
(i) a broker-dealer who purchased such Original
Notes directly from the Company for resale
pursuant to Rule 144A ("Rule 144A") or any
other available exemption under the Securities
Act or (ii) a person that is an "affiliate" of
the Company within the meaning of Rule 405
under the Securities Act) without compliance
with the registration and prospectus delivery
provisions of the Securities Act provided that
the holder is acquiring the Exchange Notes in
its ordinary course of business and is not
participating, and has no arrangement or
understanding with any person to participate,
in the distribution of the Exchange Notes.
Holders of Original Notes wishing to accept the
Exchange Offer must represent to the Company
that such conditions have been met. In the
event that the Company's belief is inaccurate,
holders of Exchange Notes who transfer Exchange
Notes in violation of the prospectus delivery
provisions of the Securities Act and without an
exemption from registration thereunder may
incur liability under the Securities Act. The
Company does not assume or indemnify holders of
Exchange Notes against such liability, although
the Company does not believe that any such
liability should exist. Each broker-dealer that
receives Exchange Notes for its own account in
exchange for Original Notes, where such
Original Notes were acquired by such
broker-dealer as a result of market-making
activities or other trading activities, must
acknowledge that it will deliver a prospectus
in connection with any resale of such Exchange
Notes. Although such broker-dealer may be an
"underwriter" within the
4
<PAGE> 9
- --------------------------------------------------------------------------------
meaning of the Securities Act, the Letter of
Transmittal states that by so acknowledging and
by delivering a prospectus, a broker-dealer
will not be deemed to admit that it is an
"underwriter" within the meaning of the
Securities Act. See "Plan of Distribution."
All resales must be made in compliance with
applicable state securities or "blue sky" laws.
Such compliance may require that the Exchange
Notes be registered or qualified in a
particular state or that the resales be made by
or through a licensed broker-dealer, unless
exemptions from these requirements are
available. The Company assumes no
responsibility with regard to compliance with
such requirements.
The Exchange Offer is not being made to, nor
will the Company accept surrenders for exchange
from, holders of Original Notes in any
jurisdiction in which the Exchange Offer or the
acceptance thereof would not be in compliance
with the securities or blue sky laws of such
jurisdiction.
Procedures for Tendering
Notes........................ Each holder of Original Notes wishing to accept
the Exchange Offer must complete, sign and date
the accompanying Letter of Transmittal or a
facsimile hereof, as the case may be, in
accordance with the instructions contained
herein and therein, and mail or otherwise
deliver such Letter of Transmittal, or such
facsimile, together with the Original Notes and
any other required documentation to the
Exchange Agent (as defined) at the address set
forth herein. By executing a Letter of
Transmittal, each holder will represent to the
Company that, among other things, (i) the
Exchange Notes acquired pursuant to such
Exchange Offer are being obtained in the
ordinary course of business of the person
receiving such Exchange Notes, whether or not
such person is the holder, (ii) neither the
holder nor any such other person has any
arrangement or understanding with any person to
participate in the distribution of such
Exchange Notes and that such holder is not
engaged in, and does not intend to engage in, a
distribution of Exchange Notes, and (iii) that
neither the holder nor any such other person is
an "affiliate," as defined in Rule 405 under
the Securities Act, of the Company. See "The
Exchange Offer -- Procedures for Tendering."
Special Procedures for
Beneficial Owners............ Any beneficial owner whose Original Notes are
registered in the name of a broker, dealer,
commercial bank, trust company or other nominee
and who wishes to tender should contact such
registered holder promptly and instruct such
registered holder to tender on such beneficial
owner's behalf. See "The Exchange Offer --
Procedures for Tendering."
Guaranteed Delivery
Procedures................... Holders of Original Notes who wish to tender
their Original Notes and whose Original Notes
are not immediately available or who cannot
deliver their Original Notes, the Letter of
Transmittal or any other documents required by
the Letter of Transmittal, as the case may be,
to the Exchange Agent (or comply with the
procedures for book-entry transfer) prior to
the Expiration Date must
- --------------------------------------------------------------------------------
5
<PAGE> 10
- --------------------------------------------------------------------------------
tender their Original Notes according to the
guaranteed delivery procedures set forth in
"The Exchange Offer -- Guaranteed Delivery
Procedures."
Untendered Notes.............. Following the consummation of the Exchange
Offer, holders of Original Notes eligible to
participate but who do not tender their
Original Notes will not have any further
exchange rights and such Original Notes will
continue to be subject to certain restrictions
on transfer. Accordingly, the liquidity of the
market for such Original Notes could be
adversely affected by the Exchange Offer.
Consequences of Failure to
Exchange..................... The Original Notes that are not exchanged
pursuant to the Exchange Offer will remain
restricted securities. Accordingly, such
Original Notes may be resold only (i) to the
Company, (ii) to a qualified institutional
buyer pursuant to Rule 144A or pursuant to Rule
144 under the Securities Act, (iii) in an
offshore transaction pursuant to the
requirements of Rule 903 or Rule 904 of
Regulation S under the Securities Act, (iv) to
an institutional accredited investor pursuant
to an exemption under the Securities Act, or
(v) pursuant to an effective registration
statement under the Securities Act. See "The
Exchange Offer -- Consequences of Failure to
Exchange."
Shelf Registration
Statement.................... If (i) the Company is not permitted to effect
the Exchange Offer as contemplated hereby
because the Exchange Offer is not permitted by
applicable law or SEC policy, (ii) any holder
of Original Notes notifies the Company within
the specified time period that (A) due to a
change in law or policy it is not entitled to
participate in the Exchange Offer or such
holder may not resell the Exchange Notes to the
public without delivering a Prospectus and the
prospectus contained in the Exchange Offer
Registration Statement is not appropriate or
available for such resales by such holder or
(B) it is a broker-dealer and owns Original
Notes acquired directly from the Company or an
affiliate of the Company, the Company has
agreed pursuant to the Registration Rights
Agreement to register the Original Notes issued
by it on a shelf registration statement (the
"Shelf Registration Statement") and use its
reasonable best efforts to cause it to be
declared effective by the SEC, as promptly as
practicable after the filing thereof, and if
applicable, use its reasonable best efforts to
keep the Shelf Registration Statement effective
for a period of two years from the Issue Date.
Withdrawal Rights............. Tenders may be withdrawn at any time prior to
5:00 p.m., New York City time, on the
Expiration Date.
Acceptance of Original Notes
and Delivery of Exchange
Notes....................... The Company will accept for exchange any and
all Original Notes which are properly tendered
in the Exchange Offer prior to 5:00 p.m., New
York City time, on the Expiration Date. The
Exchange Notes issued pursuant to the Exchange
Offer will be delivered promptly following the
Expiration Date. See "The Exchange Offer --
Terms of the Exchange Offer."
- --------------------------------------------------------------------------------
6
<PAGE> 11
- --------------------------------------------------------------------------------
Federal Income Tax
Consequences................. The exchange pursuant to the Exchange Offer
will generally not be a taxable event for
federal income tax purposes. See "Certain
Federal Income Tax Consequences."
Use of Proceeds............... There will be no cash proceeds to the Company
from the exchange pursuant to the Exchange
Offer.
Exchange Agent................ State Street Bank and Trust Company.
- --------------------------------------------------------------------------------
7
<PAGE> 12
- --------------------------------------------------------------------------------
THE EXCHANGE NOTES
Issuer........................ Simonds Industries Inc.
Securities Offered............ $100 million aggregate principal amount of
10 1/4% Senior Subordinated Notes due 2008
registered under the Securities Act.
Maturity Date................. July 1, 2008
Interest...................... The Exchange Notes will bear interest at a rate
of 10 1/4% per annum, payable semi-annually on
January 1 and July 1 commencing January 1,
1999.
Guarantees.................... The Exchange Notes will be unconditionally
guaranteed, on a senior subordinated basis,
jointly and severally, by each of the Company's
existing Domestic Wholly Owned Restricted
Subsidiaries and by certain of the Company's
future subsidiaries as described under
"Description of Exchange Notes -- Guarantees"
and "Description of Exchange Notes -- Certain
Covenants -- Issuance of Subsidiary
Guarantees."
Ranking....................... The Exchange Notes will be unsecured
obligations of the Company ranking subordinate
in right of payment with all existing and
future Senior Debt of the Company. Each
Guarantee will be an unsecured obligation of
the applicable Guarantor ranking subordinate in
right of payment to all Guarantor Senior Debt
of such Guarantor. As of June 27, 1998, on a
pro forma basis, the Company and the Guarantors
would have had no Senior Debt or Guarantor
Senior Debt outstanding. In addition, the Notes
will be effectively subordinated in right of
payment to all liabilities, including
indebtedness, of subsidiaries of the Company
which are not Guarantors. As of June 27, 1998,
on a pro forma basis, such subsidiaries would
have had approximately $14.4 million of total
liabilities, including $6.5 million of
indebtedness.
Optional Redemption........... Except as provided below, the Exchange Notes
are not redeemable at the Company's option
prior to July 1, 2003. Thereafter, the Exchange
Notes will be redeemable, in whole or in part,
at the option of the Company, at the redemption
prices set forth herein plus accrued and unpaid
interest to the date of redemption. In
addition, prior to July 1, 2001, the Company
may, at its option, redeem up to an aggregate
of 35% of the principal amount of Exchange
Notes issued with the net proceeds from one or
more Public Equity Offerings at the redemption
price set forth herein plus accrued and unpaid
interest to the date of redemption; provided
that 65% of the Exchange Notes issued remain
outstanding immediately after giving effect to
any such redemption. See "Description of
Exchange Notes -- Redemption."
Change of Control............. In the event of a Change of Control, the
Company will be obligated to make an offer to
purchase all of the outstanding Exchange Notes
at a purchase price of 101% of the principal
amount thereof plus accrued and unpaid interest
to the date of purchase. See "Description of
Exchange Notes -- Change of Control."
- --------------------------------------------------------------------------------
8
<PAGE> 13
- --------------------------------------------------------------------------------
Asset Sales................... The Company will be required in certain
circumstances to make an offer to purchase
Exchange Notes at a price equal to 100% of the
principal amount thereof, plus accrued and
unpaid interest to the date of purchase, with
the net cash proceeds of certain asset sales.
See "Description of Exchange Notes -- Certain
Covenants -- Limitation on Asset Sales."
Certain Covenants............. The Indenture contains covenants, including,
but not limited to, covenants with respect to
limitations on the following matters: (i)
incurrence of additional indebtedness, (ii)
issuance of preferred stock by subsidiaries,
(iii) creation of liens, (iv) restricted
payments, (v) sales of assets and subsidiary
stock, (vi) incurrence of other senior
subordinated indebtedness, (vii) mergers and
consolidations, (viii) payment restrictions
affecting subsidiaries, and (ix) transactions
with affiliates. See "Description of Exchange
Notes -- Certain Covenants."
RISK FACTORS
See "Risk Factors" beginning on page 11 for a discussion of certain factors
that should be considered in evaluating an investment in the Exchange Notes.
- --------------------------------------------------------------------------------
9
<PAGE> 14
- --------------------------------------------------------------------------------
SUMMARY HISTORICAL AND PRO FORMA FINANCIAL DATA
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER SIX MONTHS ENDED JUNE
----------------------------------------- ------------------------------ PRO FORMA TWELVE
PRO FORMA PRO FORMA MONTHS ENDED
1995(1) 1996 1997 1997(2) 1997 1998 1998(2) JUNE 27, 1998(2)
-------- ------- -------- --------- ------- -------- --------- ----------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
OPERATING DATA:
Net sales....................... $101,144 $98,661 $114,182 $131,808 $55,376 $ 62,641 $ 66,290 $131,440
Cost of goods sold.............. 71,455 69,828 78,798 89,892 38,247 42,281 44,940 89,539
-------- ------- -------- -------- ------- -------- -------- --------
Gross profit.................. 29,689 28,833 35,384 41,916 17,129 20,360 21,350 41,901
Selling, general and
administrative expense........ 17,594 17,135 21,149 26,913 9,944 11,961 13,165 26,340
Special compensation expense.... 7,920 -- -- -- -- -- -- --
-------- ------- -------- -------- ------- -------- -------- --------
Operating income.............. 4,175 11,698 14,235 15,003 7,185 8,399 8,185 15,561
Interest expense................ 3,530 4,399 4,963 11,549 2,394 2,477 5,822 11,620
Other expense (income), net..... (484) 245 520 543 172 167 49 389
-------- ------- -------- -------- ------- -------- -------- --------
Income before income taxes.... 1,129 7,054 8,752 2,911 4,619 5,755 2,314 3,552
Income taxes.................... 469 3,071 3,751 1,375 1,971 2,441 1,180 1,852
-------- ------- -------- -------- ------- -------- -------- --------
Net income.................... $ 660 $ 3,983 $ 5,001 $ 1,536 $ 2,648 $ 3,314 $ 1,134 $ 1,700
======== ======= ======== ======== ======= ======== ======== ========
OTHER DATA:
EBITDA(3)....................... $ 14,782 $14,026 $ 17,299 $ 18,785 $ 8,555 $ 10,246 $ 10,205 $ 19,528
Depreciation and
amortization(4)............... 2,687 2,328 3,064 3,782 1,370 1,847 2,020 3,967
Capital expenditures............ 2,640 3,638 3,708 4,105 1,542 2,085 2,224 4,714
Ratio of EBITDA to interest
expense(5).................... 1.8x
Ratio of total debt to EBITDA... 5.5x
BALANCE SHEET DATA:(6)
Working capital...................................................................... $ 23,726 $ 32,671
Total assets......................................................................... 108,594 114,827
Total debt........................................................................... 59,882 106,497
Shareholders' equity(deficit)........................................................ 24,704 (13,525)
</TABLE>
- ---------------
(1) The 1995 results and data include the five months ended May 26, 1995 for the
Predecessor and seven months ended December 30, 1995 for the Company. The
Predecessor's results include a $7,920 special compensation expense as
described in Note 2 of Notes to Consolidated Financial Statements.
(2) The pro forma operating data presented gives effect to the acquisitions of
Armstrong and Notting and the Original Offering as if they had occurred on
January 1, 1997.
(3) EBITDA is defined as operating income plus depreciation, amortization (other
than amortization of debt discount and deferred financing costs) and special
compensation expense. The Company believes that EBITDA provides additional
information for determining its ability to meet debt service requirements.
EBITDA does not represent and should not be considered as an alternative to
net income or cash flow from operations as determined by generally accepted
accounting principles, and EBITDA does not necessarily indicate whether cash
flow will be sufficient to meet cash requirements.
(4) Depreciation and amortization excludes amortization of deferred financing
costs and debt discount.
(5) For the purpose of calculating the ratio of EBITDA to interest expense,
interest expense does not include amortization of deferred financing costs.
(6) The pro forma balance sheet gives effect to the Original Offering and the
use of proceeds therefrom as if they had occurred on June 27, 1998.
- --------------------------------------------------------------------------------
10
<PAGE> 15
RISK FACTORS
Prospective investors should carefully consider the following risk factors
in addition to the other information set forth in this Prospectus before making
an investment in the Notes.
SUBSTANTIAL LEVERAGE
As of June 27, 1998, on a pro forma basis, the Company would have had
$106.5 million of consolidated indebtedness and consolidated stockholders'
deficit of $13.5 million.
The Company's indebtedness will have several important consequences for the
holders of the Notes, including, but not limited to, the following: (i) a
substantial portion of the Company's cash flow from operations must be dedicated
to debt service requirements on its indebtedness and will not be available for
other purposes; (ii) the Company's ability to obtain additional financing in the
future for working capital, capital expenditures, acquisitions, to refinance
other indebtedness or for general corporate purposes may be impaired; (iii) the
Company's leverage may increase its vulnerability to economic downturns and
limit its ability to withstand competitive pressures; and (iv) the Company's
ability to capitalize on significant business opportunities may be limited.
The Company's ability to make payments with respect to the Notes and to
satisfy its other debt obligations will depend on its future operating
performance, which will be affected by prevailing economic conditions and
financial, business and other factors, certain of which are beyond the Company's
control. The Company believes, based on current circumstances, that the
Company's cash flow, together with available borrowings under the Senior Credit
Facility (as defined), will be sufficient to permit the Company to meet its
operating expenses and to service its debt requirements as they become due.
Significant assumptions underlie this belief, including, among other things,
that the Company will succeed in implementing its business strategy and there
will be no material adverse developments in the business, liquidity or capital
requirements of the Company. If the Company is unable to service its
indebtedness, it will be forced to adopt an alternative strategy that may
include actions such as reducing or delaying capital expenditures, selling
assets, restructuring or refinancing its indebtedness or seeking additional
equity capital. There can be no assurance that any of these strategies could be
effected on satisfactory terms, if at all. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Liquidity and
Capital Resources."
RESTRICTIONS IMPOSED BY TERMS OF INDEBTEDNESS
The Indenture restricts the ability of the Company and certain of its
subsidiaries to, among other things, incur additional indebtedness, pay
dividends or make certain other restricted payments or investments, consummate
certain asset sales, enter into certain transactions with affiliates, incur
liens, or merge or consolidate with any other person or sell, assign, transfer,
lease, convey or otherwise dispose of all or substantially all of their assets.
In addition, the Senior Credit Facility contains other and more restrictive
covenants. The Senior Credit Facility requires the Company to maintain specified
financial ratios and satisfy certain financial tests. The Company's ability to
meet such financial ratios and tests may be affected by events beyond its
control, and there can be no assurance that the Company will meet such tests. A
breach of any of these covenants could result in an event of default under the
Senior Credit Facility. In an event of default under the Senior Credit Facility,
the lenders thereunder could elect to declare all amounts borrowed, together
with accrued interest, to be immediately due and payable and the lenders under
the Senior Credit Facility could terminate all commitments thereunder. If such
indebtedness were to be accelerated, there can be no assurance that the assets
of the Company would be sufficient to repay such indebtedness and the Notes. See
"Description of Senior Debt" and "Description of Exchange Notes -- Certain
Covenants."
SUBORDINATION OF NOTES AND GUARANTEES
The payment of principal of and interest on, and any premium or other
amounts owing in respect of, the Notes will be subordinated to the prior payment
in full of all existing and future Senior Debt of the Company, including all
amounts owing or guaranteed under the Senior Credit Facility. The Guarantees
will be similarly subordinated to Guarantor Senior Debt. Consequently, in the
event of a bankruptcy, liquidation, dissolution,
11
<PAGE> 16
reorganization or similar proceeding with respect to the Company or a Guarantor,
assets of the Company or such Guarantor will be available to pay obligations on
the Notes or Guarantees only after all Senior Debt of the Company or Guarantor
Senior Debt of such Guarantor, as applicable, has been paid in full, and there
can be no assurance that there will be sufficient assets to pay amounts due on
any or all of the Notes. In addition, neither the Company nor any Guarantor may
pay principal, premium, interest or other amounts on account of the Notes or any
Guarantee in the event of a payment default (or, with respect to a non-payment
default on Designated Senior Debt (as defined), for a specified period) in
respect of Senior Debt. See "Description of Exchange Notes -- Subordination." As
of June 27, 1998, on a pro forma basis, the Company and the Guarantors would
have had no Senior Debt or Guarantor Senior Debt outstanding. In addition, the
Notes will be effectively subordinated in right of payment to all liabilities,
including indebtedness, of subsidiaries of the Company which are not Guarantors.
As of June 27, 1998, on a pro forma basis, such subsidiaries would have had
$14.4 million of total liabilities, including $6.5 million of indebtedness.
DEPENDENCE ON KEY INDIVIDUALS
The success of the Company is largely dependent on the experience and
knowledge of certain key executive officers. The loss of the services of one or
more of these individuals and the Company's inability to attract and retain
other key members of the Company's management could have a material adverse
effect upon the Company.
RISKS ASSOCIATED WITH INTERNATIONAL OPERATIONS
The Company operates manufacturing, sales and service facilities in
Germany, the United Kingdom, Spain and Canada. In 1997, sales of its products in
foreign countries accounted for approximately 38% of the Company's net sales. As
a result, the Company is subject to risks associated with operations in foreign
countries, including fluctuations in currency exchange rates, imposition of
limitations on conversion of foreign currencies into dollars or remittance of
dividends and other payments by foreign subsidiaries, imposition or increase of
withholding and other taxes on remittances and other payments by foreign
subsidiaries, hyperinflation in certain foreign countries and imposition or
increase of investment, subjection to certain foreign labor laws and other
restrictions by foreign governments. Fluctuations in currency exchange rates
have had an impact on the Company's operations in the past, and historically the
Company has hedged some of its foreign currency risks. No assurance can be given
that the risks associated with operating in foreign countries will not have a
material adverse effect on the Company in the future. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
"Business."
DEPENDENCE ON SPECIALTY STEELS; RELIANCE ON LIMITED SOURCES OF SUPPLY
The principal raw material used by the Company is specialty steels. The
Company relies on limited sources for its supply of specialty steels. The loss
of any such source, or any major disruption in such source's business or failure
by it to meet the Company's needs on a timely basis could cause shortages in the
Company's supply of specialty steels that could have a material adverse effect
on the Company's business and financial condition.
The steel industry is highly cyclical in nature and steel prices are
influenced by numerous factors beyond the control of the Company, including
general economic conditions, labor costs, molybdenum and chrome costs,
competition, import duties, tariffs and currency exchange rates. If the Company
is unable to pass some or all of future steel price increases to its customers,
the Company could be materially and adversely affected. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
"Business -- Raw Materials."
RELIANCE ON METAL PROCESSING AND PRIMARY WOOD INDUSTRIES
Demand for the Company's metal and wood products generally follows
movements in the metal processing and primary wood industries. The metal
processing and primary wood industries are both cyclical in
12
<PAGE> 17
nature and are affected by global and national economic conditions. A material
change in either industry or general economic conditions could have a material
adverse effect on the Company's business and financial condition.
UNION CONTRACTS
The Company's facilities at Fitchburg and Newcomerstown employ members of
the United Steel Workers of America Union. The current contracts at these
facilities expire in 2000 and 2001, respectively. Although the Company considers
its relations with the unions to be good, there can be no assurance that the
contracts with the unions will be timely renewed without work stoppages. Work
stoppages could have a material adverse effect on the Company's business and
financial condition.
COMPETITION
The industrial cutting tool market is fragmented with numerous
participants. Although there is no one company which competes with the Company
in all three of the market sectors which the Company serves and there is no one
company which is dominant in any of such market sectors, there can be no
assurance that the Company's products will be able to compete successfully with
those of its competitors. See "Business -- Competition."
ACQUISITION STRATEGY
The Company has pursued and intends to continue to pursue acquisitions as
an important component of its strategy. No assurance can be given that in the
future other suitable acquisition candidates can be acquired on acceptable terms
or that future acquisitions, if completed, will be successful. Future
acquisitions by the Company could result in the incurrence of additional debt
and contingent liabilities which could materially adversely affect the Company's
business, operating results and financial condition. The success of any
completed acquisition will depend on the Company's ability to integrate
effectively the acquired business into the Company's. The process of integrating
acquired businesses may involve numerous risks, including difficulties in the
assimilation of operations and products, the diversion of management's attention
from other business concerns and the potential loss of key employees of the
acquired businesses. See "Business -- Business Strategy."
ENVIRONMENTAL MATTERS
The Company's operations are subject to federal, state, local and foreign
laws and regulations relating to the storage, handling, generation, treatment,
emission, release, discharge and disposal of certain substances and waste
materials. While the Company believes that it is currently in material
compliance with those laws and regulations, there can be no assurance that the
Company will not incur significant costs to remediate violations thereof or to
comply with changes in existing laws and regulations (or the enforcement
thereof). Such costs could have a material adverse effect on the Company's
business, financial condition or results of operations. See
"Business -- Environmental Matters."
CHANGE OF CONTROL
Upon the occurrence of a Change of Control, each holder of Notes will have
the right to require the Company to repurchase all or a portion of such holder's
Notes at a price in cash equal to 101% of the aggregate principal amount
thereof, plus accrued and unpaid interest, if any, to the date of repurchase.
However, the Company's ability to repurchase the Notes upon a Change of Control
may be limited by the terms of then existing contractual obligations of the
Company and its subsidiaries. In addition, the occurrence of a Change of Control
will constitute an Event of Default under the Senior Credit Facility. The Senior
Credit Facility will prohibit the purchase of the Notes unless and until such
time as the indebtedness under the Senior Credit Facility is paid in full. There
can be no assurance that the Company will have the financial resources to repay
amounts due under the Senior Credit Facility, or to repurchase or redeem the
Notes. If the
13
<PAGE> 18
Company fails to repurchase all of the Notes tendered for purchase upon the
occurrence of a Change of Control, such failure will constitute an Event of
Default under the Indenture. See "-- Substantial Leverage."
FRAUDULENT CONVEYANCE CONSIDERATIONS
Under the applicable provisions of the federal bankruptcy law or comparable
provisions of state fraudulent transfer law, if the Company or any Guarantor, at
the time it issues the Notes or incurs a Guarantee, as the case may be, (a)(i)
was or is insolvent or rendered insolvent by reason of such issuance or
incurrence, as the case may be, (ii) was or is engaged in a business or
transaction for which the assets remaining with the Company or such Guarantor,
as the case may be, constituted unreasonably small capital or (iii) intended or
intends to incur, or believed or believes that it would incur, debt beyond its
ability to pay such debts as they mature and (b) received or receives less than
reasonably equivalent value or fair consideration, the obligations of the
Company under the Notes or such Guarantor under its Guarantee, as the case may
be, could be avoided or claims in respect of the Notes or such Guarantee, as the
case may be, could be subordinated to all other debts of the Company or such
Guarantor, as the case may be. Among other things, a legal challenge of the
Notes or a Guarantee, as the case may be, on fraudulent conveyance grounds may
focus on the benefits, if any, realized by the Company or such Guarantor, as the
case may be, as a result of the issuance of the Notes or the incurrence of a
Guarantee, as the case may be. To the extent that the Notes or any Guarantee was
a fraudulent conveyance or held unenforceable for any other reason, the holders
of the Notes would cease to have any claim in respect of the Company, in the
case of the Notes, or in respect of a Guarantor whose Guarantee was avoided or
held unenforceable. In such event, the claims of the holders of the Notes would
be subject to the prior payment of all liabilities of the Company, in the case
of the Notes, or the Guarantor whose Guarantee was avoided. There can be no
assurance that, after providing for all prior claims, there would be sufficient
assets to satisfy the claims of the holders of the Notes relating to any avoided
portion of the Notes or a Guarantee.
Each Guarantor has agreed, jointly and severally with the other Guarantors,
to contribute to the obligation of any Guarantor under a Guarantee of the Notes.
Further, the Guarantee of each Guarantor provides that it is limited to an
amount that would not render the Guarantor thereunder insolvent. The Company
believes that it and the Guarantors received equivalent value at the time the
indebtedness was incurred under the Notes and the Guarantees. In addition, the
Company believes that neither it nor any of the Guarantors is or was insolvent
or is or was engaged in a business or transaction for which its remaining assets
constitute unreasonably small capital and that neither it nor any of the
Guarantors have intended or will intend to incur debts beyond its ability to pay
such debts as they mature. Since each of the components of the question of
whether the Notes or a Guarantee is a fraudulent conveyance is inherently fact
based and fact specific, there can be no assurance that a court passing on such
questions would agree with the Company.
ABSENCE OF PUBLIC MARKET; RESTRICTIONS ON RESALE
The Exchange Notes are new securities for which there currently is no
market. Although the Initial Purchasers have informed the Company that they
intend to make a market in the Exchange Notes, they are not obligated to do so
and any such market making may be discontinued at any time without notice.
Accordingly, there can be no assurance as to the development or liquidity of any
market for the Exchange Notes. The Company does not intend to apply for listing
of the Exchange Notes on any securities exchange or for quotation through the
Nasdaq National Market.
The liquidity of, and trading market for, the Exchange Notes also may be
adversely affected by general declines in the market for similar securities.
Such a decline may adversely affect such liquidity and trading markets
independent of the financial performance of, and prospects for, Simonds.
14
<PAGE> 19
USE OF PROCEEDS
The Company will receive no proceeds from the issuance of the Exchange
Notes.
CAPITALIZATION
(DOLLARS IN THOUSANDS)
The following table sets forth the capitalization of the Company at June
27, 1998 and after giving effect to the Original Offering and the acquisition of
Notting. This table should be read in conjunction with the Company's historical
financial statements and "Selected Pro Forma Financial Data" and the respective
notes thereto included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
ACTUAL PRO FORMA
-------- ---------
<S> <C> <C>
Indebtedness (including current portion):
Senior Credit Facility(1)........................... $ -- $ --
Foreign debt(2)..................................... 2,697 2,697
Note payable(3)..................................... 3,800 3,800
Original Notes...................................... 53,385 100,000
-------- -------
Total debt.................................. 59,882 106,497
-------- -------
Shareholders' Equity.................................. 24,704 (13,525)
-------- -------
Total capitalization........................ $ 84,586 $92,972
======== =======
</TABLE>
- ---------------
(1) In connection with the consummation of the Original Offering, the Company
entered into a new Senior Credit Facility which provides for borrowing in an
outstanding principal amount of $30,000.
(2) Includes the Company's retained foreign credit facility and term loan.
(3) Note issued to partially fund the acquisition of Notting; the note matures
in May 1999 and debt assumed in the acquisition of Notting.
15
<PAGE> 20
SELECTED PRO FORMA FINANCIAL DATA
(DOLLARS IN THOUSANDS)
The Company completed the acquisitions of Armstrong and Notting on August
1, 1997 and May 8, 1998, respectively. The following pro forma statements of
operations are presented as if such acquisitions and the Original Offering had
occurred and the Senior Credit Facility was in place on January 1, 1997. The
following pro forma balance sheet gives effect to the Original Offering and the
use of proceeds therefrom as if they had occurred on June 27, 1998.
The accompanying selected pro forma financial data have been prepared
utilizing a preliminary purchase price allocation for Notting. The preliminary
purchase price allocation of Notting is subject to refinement until all
pertinent information regarding the acquisition is obtained and, accordingly,
the amounts presented herein are subject to change. The actual results of
operations presented for both Armstrong and Notting are unaudited. In addition,
the pro forma adjustments presented in both the pro forma statements of
operations and the pro forma balance sheet have not been audited.
The accompanying pro forma information is presented for illustrative
purposes and is not necessarily indicative of the financial position or results
of operations which would actually have been reported had the above transactions
been in effect during the periods presented or which may be reported in the
future. The results of operations for the six months ended June 27, 1998 are not
necessarily indicative of the results of operations to be expected for the full
year.
PRO FORMA STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 1997
-------------------------------------------------------------------------------------
7 MONTHS
ARMSTRONG ARMSTRONG NOTTING NOTTING OFFERING PRO
ACTUAL ACTUAL(a) ADJUSTMENTS ACTUAL(b) ADJUSTMENTS ADJUSTMENTS FORMA
-------- --------- ----------- --------- ----------- ----------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Net sales.................. $114,182 $5,720 -- $11,906 -- -- $131,808
Cost of goods sold......... 78,798 3,764 -- 7,330 -- -- 89,892
-------- ------ ----- ------- ----- ------- --------
Gross profit............. 35,384 1,956 -- 4,576 -- -- 41,916
Selling, general and
administrative expense... 21,149 1,608 154(c) 3,955 47(c) -- 26,913
-------- ------ ----- ------- ----- ------- --------
Operating income
(loss)................. 14,235 348 (154) 621 (47) -- 15,003
Interest expense........... 4,963 -- 390(d) 198 723(d) 5,275(d) 11,549
Other expense (income)..... 520 35 -- (12) -- -- 543
-------- ------ ----- ------- ----- ------- --------
Income (loss) before
income taxes........... 8,752 313 (544) 435 (770) (5,275) 2,911
Income taxes............... 3,751 110 (196)(e) 109 (289)(e) (2,110)(e) 1,375
-------- ------ ----- ------- ----- ------- --------
Net income (loss).......... $ 5,001 $ 203 $(348) $ 326 $(481) $(3,165) $ 1,536
======== ====== ===== ======= ===== ======= ========
EBITDA(f).................. $ 18,785
========
</TABLE>
See Notes to the Selected Pro Forma Financial Data.
16
<PAGE> 21
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 1998
-------------------------------------------------------------
NOTTING NOTTING OFFERING PRO
ACTUAL ACTUAL(b) ADJUSTMENTS ADJUSTMENTS FORMA
------- --------- ----------- ----------- -------
<S> <C> <C> <C> <C> <C>
Net sales............................ $62,641 $3,649 $ -- $ -- $66,290
Cost of goods sold................... 42,281 2,659 -- -- 44,940
------- ------ ----- ------- -------
Gross profit....................... 20,360 990 -- -- 21,350
Selling, general and administrative
expense............................ 11,961 1,188 16(c) -- 13,165
------- ------ ----- ------- -------
Operating income (loss)............ 8,399 (198) (16) -- 8,185
Interest expense..................... 2,477 71 241(d) 3,033(d) 5,822
Other expense........................ 167 (118) -- -- 49
------- ------ ----- ------- -------
Income (loss) before income
taxes........................... 5,755 (151) (257) (3,033) 2,314
Income taxes......................... 2,441 48 (96)(e) (1,213)(e) 1,180
------- ------ ----- ------- -------
Net income (loss).................... $ 3,314 $ (199) $(161) $(1,820) $ 1,134
======= ====== ===== ======= =======
EBITDA(f)............................ $10,205
=======
<CAPTION>
TWELVE MONTHS ENDED JUNE 1998
----------------------------------------------------------------------------------------
ARMSTRONG ARMSTRONG NOTTING NOTTING OFFERING PRO
ACTUAL ACTUAL(a) ADJUSTMENTS ACTUAL(b) ADJUSTMENTS ADJUSTMENTS FORMA
-------- --------- ----------- --------- ----------- ----------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Net sales............... $121,447 $844 $ -- $9,149 $ -- $ -- $131,440
Cost of goods sold...... 82,832 544 -- 6,163 -- -- 89,539
-------- ---- ---- ------ ----- ------- --------
Gross profit.......... 38,615 300 -- 2,986 -- -- 41,901
Selling, general and
administrative
expense............... 23,166 239 22(c) 2,874 39(c) -- 26,340
-------- ---- ---- ------ ----- ------- --------
Operating income
(loss).............. 15,449 61 (22) 112 (39) -- 15,561
Interest expense........ 5,046 -- 54(d) 176 603(d) 5,741(d) 11,620
Other expense
(income).............. 515 (8) -- (118) -- -- 389
-------- ---- ---- ------ ----- ------- --------
Income (loss) before
income taxes........ 9,888 69 (76) 54 (642) (5,741) 3,552
Income taxes............ 4,221 72 (28)(e) 124 (241)(e) (2,296)(e) 1,852
-------- ---- ---- ------ ----- ------- --------
Net income (loss)....... $ 5,667 $ (3) $(48) $ (70) $(401) $(3,445) $ 1,700
======== ==== ==== ====== ===== ======= ========
EBITDA(f)............... $ 19,528
========
</TABLE>
See Notes to the Selected Pro Forma Financial Data.
17
<PAGE> 22
PRO FORMA BALANCE SHEET
<TABLE>
<CAPTION>
AS OF JUNE 27, 1998
------------------------------------
OFFERING
ACTUAL ADJUSTMENTS PRO FORMA
-------- ----------- ---------
<S> <C> <C> <C>
ASSETS
Cash....................................................... $ 835 $ 1,955(g) $ 2,790
Accounts receivable........................................ 18,842 -- 18,842
Inventories, net........................................... 28,697 -- 28,697
Other current assets....................................... 3,568 -- 3,568
-------- -------- --------
Total current assets.................................. 51,942 1,955 53,897
Property, plant and equipment, net......................... 32,956 -- 32,956
Goodwill, net of accumulated amortization.................. 22,065 -- 22,065
Deferred financing costs, net of accumulated
amortization............................................. 722 4,278(h) 5,000
Other assets............................................... 909 -- 909
-------- -------- --------
Total assets..................................... $108,594 $ 6,233 $114,827
======== ======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
Overdraft facilities....................................... $ 150 $ -- $ 150
Bank Loans................................................. -- -- --
Notes payable.............................................. 5,802 (1,786)(i) 4,016
Current portion of long-term debt.......................... 5,255 (3,051)(i) 2,204
Accounts payable........................................... 6,578 -- 6,578
Accrued payroll and employee benefits...................... 3,693 -- 3,693
Other accrued liabilities.................................. 4,088 (2,153)(j) 1,935
Currently deferred income taxes............................ 2,650 -- 2,650
-------- -------- --------
Total current liabilities............................. 28,216 (6,990) 21,226
Deferred income taxes...................................... 4,386 -- 4,386
Other long-term liabilities................................ 933 -- 933
Long-term pension expense.................................. 1,530 -- 1,530
Long-term debt, net of current portion..................... 48,825 (48,548)(i) 277
Notes...................................................... -- 100,000 100,000
-------- -------- --------
Total liabilities..................................... 83,890 44,462 128,352
Common stock............................................... 1 -- 1
Additional paid-in capital................................. 10,553 (35,000)(k) (24,447)
Retained earnings.......................................... 15,173 (3,229)(k) 11,944
Cumulative translation adjustment.......................... (976) -- (976)
Treasury stock, at cost.................................... (47) -- (47)
-------- -------- --------
Total shareholders' equity (deficit).................. 24,704 (38,229) (13,525)
-------- -------- --------
Total liabilities and shareholders' equity
(deficit)...................................... $108,594 $ 6,233 $114,827
======== ======== ========
</TABLE>
See Notes to the Selected Pro Forma Financial Data.
18
<PAGE> 23
NOTES TO SELECTED PRO FORMA FINANCIAL DATA
(DOLLARS IN THOUSANDS)
(a) The Company acquired Armstrong on August 1, 1997. Reflects actual 1997
historical results of Armstrong prior to acquisition.
(b) The Company acquired Notting on May 8, 1998. For purposes of determining
1997 pro forma results, Notting's statement of operations is for its fiscal
year ended September 30, 1997. For purposes of calculating pro forma
results for the periods ended June 27, 1998, the statement of operations
reflects actual historical results of Notting prior to acquisition.
(c) Reflects adjustments related to amortization of non-compete agreement and
additional goodwill as shown below:
<TABLE>
<CAPTION>
6 MONTHS TWELVE MONTHS
YEAR ENDED ENDED ENDED
DECEMBER 27, JUNE 27, JUNE 27,
1997 1998 1998
------------ ------------- -------------
<S> <C> <C> <C>
Armstrong non-compete (5 year life)..................... $101 -- $15
Armstrong goodwill (40 year life)....................... 53 -- 8
---- --- ---
Total........................................... $154 -- $23
==== === ===
Notting goodwill (40 year life)......................... $ 47 $16 $39
==== === ===
</TABLE>
(d) Reflects the net increase in interest expense attributed to the increased
indebtedness resulting from the acquisitions of Armstrong and Notting and
the Original Offering as if they had occurred and the Senior Credit
Facility as if it had been in place on the first day of the periods
indicated.
(e) Reflects the impact on income taxes of the increase in interest expense and
the amortization of the non-compete agreement.
(f) EBITDA is defined as operating income plus depreciation and amortization
(other than amortization of debt discount and deferred financing costs).
The Company believes that EBITDA provides additional information for
determining its ability to meet debt service requirements. EBITDA does not
represent and should not be considered as an alternative to net income or
cash flow from operations as determined by generally accepted accounting
principles, and EBITDA does not necessarily indicate whether cash flow will
be sufficient to meet cash requirements.
(g) Reflects excess cash resulting from the Original Offering.
(h) Reflects estimated increase in deferred financing fees related to the
Original Offering and the Senior Credit Facility and the estimated
write-off of deferred financing costs related to the repaid indebtedness.
The write-off was recorded as an extraordinary loss on the extinguishment
of debt, net of tax, in the month the Original Offering closed.
(i) Represents estimated repayment of the Company's existing domestic
indebtedness.
(j) Reflects decrease in income taxes payable resulting from a benefit
attributed to a compensation charge of $4,500 incurred in connection with
the repurchase of all outstanding stock options of the Company with
proceeds from the Original Offering. The compensation charge was reflected
in the Company's operating results in July 1998 when the Original Offering
was closed. In addition, reflects decrease in income taxes payable from a
benefit resulting from the write-offs of unamortized debt discount and
deferred financing costs totalling $882.
(k) Reflects decrease in shareholders' investment resulting from the
Recapitalization (as defined) distribution paid to existing
securityholders, including the repurchase of stock options, and the
write-off of deferred financing costs, net of tax.
19
<PAGE> 24
SELECTED HISTORICAL FINANCIAL DATA
(DOLLARS IN THOUSANDS)
The selected consolidated operating and balance sheet data for and as of
the seven months ended December 30, 1995 and the years ended December 28, 1996
and December 27, 1997 are derived from the Company's audited consolidated
financial statements included elsewhere herein. The selected consolidated
operating and balance sheet data as of and for the years ended January 1, 1994
and December 31, 1994 and the five months ended May 26, 1995 are derived from
the Predecessor's audited consolidated financial statements. The selected
consolidated operating and balance sheet data for the six months ended June 28,
1997 and June 27, 1998, and as of the end of such periods, have been derived
from the Company's unaudited condensed consolidated financial statements
included elsewhere herein which reflect, in the opinion of management, all
adjustments of a normal recurring nature necessary for a fair statement of the
interim periods presented. The results of operations for the six months ended
June 27, 1998 are not necessarily indicative of the results of operations to be
expected for the full year. The following selected consolidated financial data
should be read in conjunction with the Consolidated Financial Statements and the
Notes thereto and the information contained in "Management's Discussion and
Analysis of Financial Condition and Results of Operations" included elsewhere in
this Offering Memorandum.
<TABLE>
<CAPTION>
PREDECESSOR COMPANY
---------------------------- --------------------------------------------------
SIX MONTHS ENDED
YEAR ENDED 5 MONTHS 7 MONTHS YEAR ENDED JUNE
----------------- ENDED ENDED ------------------ ------------------
1993 1994 5/26/95 12/30/95 1996 1997 1997 1998
------- ------- -------- -------- ------- -------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
OPERATING DATA:
Net sales.............................. $86,528 $95,284 $42,212 $58,932 $98,661 $114,182 $55,376 $ 62,641
Cost of goods sold..................... 62,263 68,537 30,102 41,353 69,828 78,798 38,247 42,281
------- ------- ------- ------- ------- -------- ------- --------
Gross profit.................... 24,265 26,747 12,110 17,579 28,833 35,384 17,129 20,360
Selling, general and administrative
expense.............................. 16,513 17,028 7,418 10,176 17,135 21,149 9,944 11,961
Special compensation expense........... -- -- 7,920 -- -- -- -- --
------- ------- ------- ------- ------- -------- ------- --------
Operating income (loss)......... 7,752 9,719 (3,228) 7,403 11,698 14,235 7,185 8,399
Interest expense....................... 1,978 1,623 650 2,880 4,399 4,963 2,394 2,477
Other expense (income), net............ 149 (432) (276) (208) 245 520 172 167
------- ------- ------- ------- ------- -------- ------- --------
Income (loss) before income
taxes......................... 5,625 8,528 (3,602) 4,731 7,054 8,752 4,619 5,755
Income taxes........................... 2,413 3,491 (1,387) 1,856 3,071 3,751 1,971 2,441
------- ------- ------- ------- ------- -------- ------- --------
Net income (loss)............... $ 3,212 $ 5,037 $(2,215) $ 2,875 $ 3,983 $ 5,001 $ 2,648 $ 3,314
======= ======= ======= ======= ======= ======== ======= ========
OTHER DATA:
EBITDA from operations(1).............. $10,723 $12,964 $ 6,109 $ 8,673 $14,026 $ 17,299 $ 8,555 $ 10,246
Depreciation and amortization.......... 3,079 3,307 1,498 1,500 2,712 3,459 1,552 2,023
Capital expenditures................... 2,091 2,377 745 1,895 3,638 3,708 1,542 2,085
Ratio of income to fixed charges(2).... 3.6x 5.7x -- 2.6x 2.5x 2.7x 2.8x 3.2x
BALANCE SHEET DATA:
Working capital........................ $14,386 $17,753 $16,033 $21,786 $22,209 $ 21,651 $23,260 $ 23,726
Total assets........................... 56,172 56,931 62,413 77,728 82,620 95,343 89,620 108,594
Total debt............................. 21,484 16,278 14,899 46,809 46,175 51,692 52,016 59,882
Shareholders' equity................... 19,866 24,986 24,608 13,185 17,198 21,615 17,882 24,704
</TABLE>
- ---------------
(1) EBITDA is defined as operating income plus depreciation, amortization (other
than amortization of debt discount and deferred financing costs) and special
compensation expense. The Company believes that EBITDA provides additional
information for determining its ability to meet debt service requirements.
EBITDA does not represent and should not be considered as an alternative to
net income or cash flow from operations as determined by generally accepted
accounting principles, and EBITDA does not necessarily indicate whether cash
flow will be sufficient to meet cash requirements.
(2) For purposes of calculating this ratio, "income" consists of income before
provision for income taxes and fixed charges. "Fixed charges" consists of
interest expense and the estimated interest portion of rental payments on
operating leases. Such income was insufficient to cover fixed charges by
approximately $2,100 for the five months ended May 26, 1995.
20
<PAGE> 25
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(DOLLARS IN THOUSANDS)
The following discussion of the Company's financial condition and results
of operations should be read in conjunction with the Company's consolidated
financial statements and notes thereto, as well as the selected financial
information, all appearing elsewhere herein.
GENERAL
Simonds has been in continuous operation selling cutting tools for 166
years. In May 1995, the Company was acquired by Fleet and senior management. The
acquisition enabled the Company to continue to implement its business strategy,
including pursuing strategic acquisitions. Since 1995, the Company has completed
four acquisitions, including Strongridge in October 1996, the bit and shank
product line of Pacific Hoe Company in January 1997, Armstrong in August 1997,
and Notting on May 5, 1998. The Company's results of operations for the periods
1995-1997 and the six months ending June 27, 1998 reflect the impact of all of
the acquisitions. In particular, the Company benefited from three months in 1996
and a full year in 1997 of operations of Strongridge, five months of operations
of Armstrong in 1997 and two months of operations of Notting in 1998. Results
for the year ended December 30, 1995 contain a one-time compensation expense
related to the acquisition of the Company. See Note 2 of the Notes to
Consolidated Financial Statements.
RESULTS OF OPERATIONS
The following table sets forth, for the periods presented, the percentage
which such results bears to net sales.
<TABLE>
<CAPTION>
PERCENTAGE OF NET SALES
---------------------------------------------
SIX MONTHS ENDED
YEAR ENDED DECEMBER JUNE
------------------------- ----------------
1995(a) 1996 1997 1997 1998
------- ----- ----- ------ ------
<S> <C> <C> <C> <C> <C>
Net sales......................................... 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of goods sold................................ 70.6 70.8 69.0 69.1 67.5
----- ----- ----- ----- -----
Gross profit............................ 29.4 29.2 31.0 30.9 32.5
Selling, general and administrative expense....... 17.4 17.4 18.5 18.0 19.1
Special compensation expense...................... 7.8 -- -- -- --
----- ----- ----- ----- -----
Operating income........................ 4.2 11.8 12.5 12.9 13.4
Interest expense.................................. 3.5 4.5 4.3 4.3 4.0
Other expense (income), net....................... (0.5) 0.2 0.5 0.3 0.3
----- ----- ----- ----- -----
Income before income taxes.............. 1.2 7.1 7.7 8.3 9.1
Income taxes...................................... 0.5 3.1 3.3 3.6 3.9
----- ----- ----- ----- -----
Net income.............................. 0.7% 4.0% 4.4% 4.7% 5.2%
===== ===== ===== ===== =====
</TABLE>
- ---------------
(a) The year ended 1995 includes the five months ended May 26, 1997 of the
Predecessor and seven months ended December 30, 1995 of the Company.
Six Months Ended June 27, 1998 Compared To Six Months Ended June 28, 1998
Net Sales: Net sales increased 13.1% to $62,641 for the first half of 1998
from $55,376 for the same period in 1997. This increase was primarily the result
of increased wood product sales of $4,917 in the first half of 1998 from the
acquisition of Armstrong which was completed on August 1, 1997 and, to a lesser
extent, from increased sales of carbide tip bits and Red Streak(R) bands.
Additionally, 1998 sales included $1,727 due to the recent acquisition of W.
Notting Limited, effective May 1, 1998. Changes in foreign currency exchange
21
<PAGE> 26
rates in the first half of 1998 (primarily the weaker Canadian dollar and German
Mark) negatively impacted the Company's net sales by $886 when compared to the
corresponding period last year.
Gross Profit Margin: Gross profit as a percentage of net sales for 1998
was 32.5% compared to 30.9% for the comparable period in 1997. Favorable raw
material prices for Red Streak(R) bands, carbide tips, and the majority of the
Company's knife steel along with higher production levels without significant
increases in fixed expenses are the main reasons for margin improvements. In
addition, the gross profit of Armstrong in the first six months of 1998 and of
Notting for May and June of 1998 increased gross profit for the reported period.
Selling, General and Administrative Expenses: Selling, general and
administrative expenses as a percent of net sales were 19.1% for the first six
months of 1998 and 18.0% for the comparable period a year ago. The higher level
of expenses in 1998 as compared to 1997 was primarily due to the addition of
Armstrong and Notting in 1998.
Operating Income: As a result of the aforementioned factors, operating
income increased 16.9% to $8,399 or 13.4% of net sales in 1998 from $7,185 or
12.9% in 1997.
Interest Expense: Interest expense was higher in 1998 compared to the
corresponding period in 1997 as a result of higher debt balances primarily due
to the above mentioned acquisitions of Armstrong and Notting.
Income Taxes: The Company's effective tax rate in 1998 decreased to 42.4%
from 42.7% in 1997. Improved profitability in the United Kingdom, which has a
lower tax rate, has affected the consolidated effective tax rate.
Net Income: As a result of the foregoing, net income increased 25.2% to
$3,314 in 1998 from $2,648 in 1997.
Year Ended December 27, 1997 Compared To Year Ended December 28, 1996
Net Sales: Net sales increased 15.7% to $114,182 for 1997 from $98,661 for
1996. Of this increase, $3,457 resulted from the contribution of five months of
Armstrong and $4,647 from a full year of results of Strongridge in 1997 as
compared to three months in 1996. In addition, the Company benefited from the
acquisition of the bit and shank business from Pacific Hoe Company. The
remaining increase in net sales was due to increased demand from the wood and
metal markets in the United States and Canada, which was reflected in increased
sales of levelers and tensioners, Red Streak(R) and waferizer knives as well as
increased sales of metal band saws and files.
Gross Profit Margin: Gross profit as a percentage of net sales increased
to 31.0% in 1997 compared to 29.2% in 1996. This increase was primarily due to
lower costs of raw materials, other manufacturing efficiencies and the addition
of higher gross profit margin products at Armstrong.
Selling, General and Administrative Expenses: Selling, general and
administrative expenses increased as a percent of net sales to 18.5% in 1997
from 17.4% in 1996. This was partly due to additional bonus accruals,
commissions, and marketing incentive plans resulting from the Company exceeding
incentive targets. In addition, the increase resulted from the inclusion of
Strongridge and Armstrong, which have higher percentages of selling, general and
administrative expenses to net sales than the Company.
Operating Income: As a result of the aforementioned factors, operating
income increased 21.7% to $14,235 or 12.5% of net sales in 1997 from $11,698 or
11.9% in 1996.
Interest Expense: Interest expense increased to $4,963 in 1997 from $4,399
in 1996 as a result of borrowings to finance acquisitions.
Income Taxes: The Company's effective tax rate decreased to 42.9% in 1997
from 43.5% in 1996. The income tax rates principally differed from the statutory
U.S. rate of 34% as a result of state income tax provisions, nondeductible
amortization expense (for tax purposes), the change in tax valuation reserves
and the effect of foreign income tax on foreign source income.
22
<PAGE> 27
Net Income: As a result of the foregoing, net income increased 25.6% to
$5,001 in 1997 from $3,983 in 1996.
Year Ended December 28, 1996 Compared To Year Ended December 30, 1995
Net Sales: Net sales decreased 2.5% to $98,661 in 1996 from $101,144 in
1995. This reduction was primarily attributable to reduced demand for the
Company's wood cutting products. Demand was impacted by a softening in new home
sales, a drop in lumber consumption and a corresponding decrease in lumber
prices. Lumber prices began to fall in the latter part of 1995 and continued
into 1996, resulting in the lumber mills cutting back production and postponing
capital investment in new filing room equipment. The majority of the decrease
was in filing room equipment and knife grinders.
Gross Profit Margin: Gross profit as a percentage of net sales remained
relatively stable at 29.2% in 1996 compared to 29.4% in 1995.
Selling, General and Administrative Expenses: Selling, general and
administrative expenses remained flat at 17.4% of net sales in 1996 compared to
1995.
Special Compensation Expense: In 1995 the Predecessor incurred a one-time
compensation expense totaling $7,920 related to the acquisition of Simonds.
Operating Income: As a result of the aforementioned factors, excluding the
special compensation expense, operating income decreased 3.3% to $11,698 or
11.9% of net sales in 1996 from $12,095 or 11.9% of net sales in 1995.
Interest Expense: Interest expense increased $869 in 1996 from 1995 as a
result of the acquisition of Simonds in May 1995.
Other Expense (Income), net: Other expense (income), net was ($484) in
1995 and $245 in 1996 due to a foreign exchange gain in 1995 and a foreign
exchange loss in 1996.
Income Taxes: The Company's effective tax rate increased to 43.5% in 1996
from 41.5% in 1995. The Company's 1996 effective tax rate was impacted by
increased profit in its German operations, where there is a higher tax rate.
Net Income: As a result of the foregoing, net income increased to $3,983
in 1996 as compared to $660 in 1995.
LIQUIDITY AND CAPITAL RESOURCES
The Company's principal capital requirements are to fund working capital
needs, meet required debt payments, and to complete planned maintenance and
manufacturing improvements.
During 1995, 1996, 1997 and the six months ended June 27, 1998, net cash
provided by operations was $7,097, $6,665, $13,046 and $2,700, respectively.
During 1995, 1996, 1997 and for the six months ended June 27, 1998, net cash
used in investing activities was $47,193, $4,788, $17,304 and $8,809,
respectively, consisting primarily of capital expenditures and acquisitions. In
1995, $44,620 was used to acquire the Predecessor. In 1997, approximately
$14,000 was used for the acquisitions of Armstrong and the bit and shank product
line of Pacific Hoe Company. During 1995, 1996, 1997 and for the six months
ended June 27, 1998, net cash provided (used) by financing activities was
$40,373, ($2,526), $4,299 and $5,814. In 1995, $35,800 was provided from the
proceeds of the issuance of long-term debt, which was used to pay off $9,710 in
existing debt, and to finance the acquisition of the Predecessor.
In connection with the Original Offering, the Company entered into an
agreement with a group of bank lenders to provide the Senior Credit Facility.
The Senior Credit Facility provides a $30,000 line of credit to meet acquisition
and expansion needs as well as seasonal working capital and general corporate
requirements. Borrowings under the Senior Credit Facility bear interest at a
fluctuating rate based on, at the Company's option, either the lender's
alternate base rate, as defined, or LIBOR plus the applicable margin. A
23
<PAGE> 28
commitment fee calculated based upon the unused portion of the revolving credit
facility is payable quarterly in arrears.
The Company believes that future cash flows from operations, together with
the borrowings available under the Senior Credit Facility will provide the
Company with sufficient liquidity and financial resources to finance its growth
and satisfy its working capital requirements for the foreseeable future. The
Company may not be able to generate sufficient cash flows from operations to pay
the entire principal amount of the Notes when due in 2008. In such event, the
Company would be required to refinance the Notes. However, there can be no
assurance that the Company will be able to obtain financing acceptable terms.
See "Risk Factors -- Substantial Leverage."
Seasonality
Historically, the Company's business has not been subject to seasonality in
any material respect. The Company's third quarter, which includes July through
September, is typically lower due to customers' and plant vacation shutdowns.
Inflation
Certain of the Company's expenses, such as wages and benefits, occupancy
costs and equipment repair and replacement, are subject to normal inflationary
pressures. Although the Company to date has been able to offset inflationary
cost increases through operating efficiencies, there can be no assurance that
the Company will be able to offset any future inflationary cost increases
through similar efficiencies.
YEAR 2000
The Company has a formal Year 2000 Compliance Plan which it began to
implement in 1996 to ensure that its hardware, operating systems and software
will function properly with respect to dates in the year 2000 and thereafter.
The Company does not expect that the cost to modify its information
technology infrastructure to be Year 2000 compliant will be material to its
financial condition or results of operations. The Company does not anticipate
any material disruption in its operations as a result of any failure by the
Company to be in compliance. The Company does not currently have any information
concerning the Year 2000 compliance status of its suppliers and customers. In
the event that any of the Company's significant suppliers or customers does not
successfully and timely achieve Year 2000 compliance, the Company's business or
operations could be adversely affected.
24
<PAGE> 29
BUSINESS
GENERAL
Simonds, with operations since 1832, is a leading global manufacturer and
marketer of high quality industrial cutting tools. With facilities in North
America and Europe, the Company sells its products into three distinct end user
markets: metal (49% of 1997 net sales on a pro forma basis), wood (40%), and
paper (11%). Management believes the Company holds a number one, two or three
share position in each of the markets it serves. For the twelve months ended
June 27, 1998, net sales and EBITDA were $131.4 million and $19.5 million,
respectively, on a pro forma basis.
The Company manufactures saw blades, files, knives and steel rule that,
when mounted on industrial machinery, cut, shape, bend and perforate metal, wood
and paper. In addition, the Company manufactures and distributes machinery,
including a complete line of filing room equipment used primarily in saw mills.
Management believes that Simonds manufactures and markets the most
technologically advanced industrial cutting tools available in the industry. The
Company's more than 25,000 products are used in a wide variety of industrial
applications. End users of Simonds' products range from large companies such as
General Motors Corporation and Georgia-Pacific Corporation to small businesses
such as machine shops. The primary end users of the Company's metal cutting
tools include aerospace, automotive, construction and home appliance
manufacturers as well as steel service centers, forge shops and aluminum
foundries. The Company's wood cutting products are used in saw mills, pulp and
paper mills, furniture manufacturing facilities and wood chipping operations.
Steel rule products produced by the Company are used in the die making and
packaging industries. The products are consumable and require replacement many
times per year. More than 85% of the Company's net sales are derived from sales
of replacement products for use in the aftermarket. In addition, despite the
significant value added by the Company's products in the processes in which they
are used, these products add relatively little cost to end users' operations.
These factors have contributed to the Company's historically stable revenue
stream.
Management believes that as a result of its long and successful history,
Simonds has been able to create a loyal, knowledgeable and efficient
distribution base. A substantial majority of the Company's products are marketed
and sold to end users in each of its market segments worldwide through
approximately 7,000 independent distributors. This distribution base provides
the Company with a competitive advantage by allowing the Company to more easily
sell its broad range of products, including new and sophisticated tools. In
addition, through its independent distributors the Company is able to offer end
users the highest quality customer service, including the resharpening and
maintenance of its cutting tools. The Company complements its distribution base
with a service oriented, highly trained and experienced sales force who spend
most of their time with end users. The Company sells its products directly to
over 12,000 distributors and end users with no single customer representing more
than 2.1% of total net sales for 1997.
Simonds' products are marketed and sold worldwide in 92 countries through
facilities located in the United States, Canada, Germany, Spain and the United
Kingdom. The Company has expanded its product sales outside of North America
from 15% of net sales in 1991 to 24% in 1997 on a pro forma basis through
acquisitions and internal growth. The Company intends to continue its
international growth by broadening its product offerings in existing markets and
entering new geographic areas. For the year ended December 27, 1997, the
Company's net sales in the United States, Canada, Europe and the rest of the
world represented approximately 62%, 14%, 17% and 7% of total Company net sales,
respectively, on a pro forma basis.
Simonds benefits from an experienced management team with a demonstrated
track record of successfully implementing the Company's business strategy. The
senior management team averages more than 20 years of industry experience.
Management believes that this experience, in combination with the Company's 166
year history and superior product quality, has made Simonds a widely recognized
brand name among its target customer base.
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<PAGE> 30
BUSINESS STRATEGY
Management believes that Simonds is well positioned to maintain its current
leadership position within the cutting tool industry. The Company's strategic
objective is to continue to design, manufacture and sell superior cutting tools
and equipment while leveraging its metallurgy and tooth edge geometry expertise.
The Company focuses on end user markets where high product performance is valued
and in geographic markets with a developed and large industrial base. The
Company's objective is to continue to grow its sales and expand its operating
margins by pursuing the following business strategy:
Continued Margin Expansion Through Focus on Profitability. The Company's
culture and organization focuses on consistently improving profitability. The
Company's compensation structure creates incentives for all personnel to focus
on profit margins. In each of the manufacturing facilities, all levels of
employees from machine operators through plant managers receive bonuses tied to
the profitability or productivity of their particular facility. The Company's
corporate sales management and sales force receive incentive compensation based
on achieving specific profit margins as well as sales targets. Senior
management's incentive compensation is based on targeted levels of the Company's
profitability. As a result of this cultural focus and emphasis on profitability,
Simonds' EBITDA margin has grown from 10.4% of net sales in 1990 to 15.2% of net
sales in 1997.
Strategic Acquisitions. The Company intends to continue to pursue
strategic acquisitions in the highly fragmented industrial cutting tool
industry. Management believes that there are many attractive potential
acquisition targets both domestically and internationally. Since 1989, the
Company has completed eight acquisitions as described in the following table.
<TABLE>
<CAPTION>
MARKET YEAR
ENTITY ACQUIRED SEGMENT PRODUCT TYPE LOCATIONS ACQUIRED
- --------------- ------- ----------------------- --------------------- --------
<S> <C> <C> <C> <C>
Michigan Knife Company Wood - Industrial Knives North America 1989
- Circular Saws
Mainland Manufacturing Inc. Wood - Wide Band Saws Western Canada 1990
- Circular Saws
- Filing Room Equipment
A.H. Ralston Limited Metal - Industrial Files United Kingdom 1990
Wespa Metal - Band Saws Germany 1992
- Hack Saws
Strongridge Metal - Sales & Marketing North America 1996
Product line of Pacific Hoe Company Wood - Bits and Shanks -- 1997
Armstrong Wood - Filing Room Equipment United States 1997
Notting Paper - Steel Rule Europe, North America 1998
</TABLE>
Each of these acquisitions has provided significant strategic opportunities for
the Company by either expanding product offerings or geographic markets in which
these products are sold. For example, Notting expanded the Company's steel rule
product line, Armstrong expanded the Company's filing room equipment machinery,
Strongridge provided access to smaller distributors, and Wespa further developed
the metal band product line. The Company is presently evaluating certain
acquisition opportunities and as part of its strategy will continue to do so in
the future. There can be no assurance that the Company will consummate any such
acquisitions or, if consummated, the timing thereof.
Emphasis on Product Innovation. Management believes that the Company is a
leader in the development of innovative and technologically superior products.
Throughout its history, the Company has often been first to introduce new
product technologies, including bits and shanks, carbide tipped band saws,
circular and band levelers, band tensioners, computerized saw control and narrow
wood band technology. An even greater emphasis on product innovation was
initiated in 1996 with the creation of a staff level position devoted to product
development. Recent new products include (i) Epic(R), a state-of-the-art metal
band saw line; (ii) automated band saws and circular saw levelers, revolutionary
products which allow for automated tensioning and leveling of band saws and
circular saws; (iii) Red Streak(R), a premier product for portable saw mill use
that enables users to cut lumber in the forest, resulting in lower operating
expenses; and
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<PAGE> 31
(iv) Dominator(R), carbide tip bits which last significantly longer than high
speed steel bits. Management estimates that the Company introduces approximately
10 to 25 new product innovations annually. New product innovations are important
to the Company's independent distributors, providing them with the ability to
expand their product lines, the opportunity to improve their margins and the
ability to offer their customers enhanced products.
Low Cost Manufacturing. The Company continues to focus on being a low cost
producer of high value-added products within the cutting tool industry. The
Company has continued to benefit from economies of scale in both purchasing and
manufacturing. Management believes that the Company is able to purchase
specialty steel, its primary raw material, more efficiently than many of its
smaller competitors, generating significant savings. The Company has reduced its
manufacturing costs and improved its consistency of product quality as a result
of capital investment and process control programs. Capital investment of more
than $10 million since 1995 in new and upgraded equipment such as electron beam
welding, milling equipment, grinding equipment, heat treating equipment, and
in-line process controls has resulted in productivity and quality gains. The
Company's Fitchburg and Newcomerstown facilities received ISO 9002 certification
in 1993 and 1997, respectively. As a measure of improved efficiency, the
Company's sales per employee has increased from approximately $87,000 in 1989 to
approximately $151,000 in 1997.
PRODUCTS AND MARKET
Simonds produces an array of world-class industrial cutting tools for a
wide variety of end user markets. The Company's products can be segmented into
three major market sectors: metal (49% of 1997 net sales on a pro forma basis);
wood (40%); and paper (11%).
Metal Cutting Products
The Company is a world leader in the manufacture and marketing of metal
cutting products with 1997 pro forma net sales of $64.3 million. The Company's
products primarily include metal band saw blades and files for use in
industrial/commercial applications. In addition, the Company manufactures and
markets other products for similar applications. Simonds is one of only two
companies with a significant presence in both the band saw and file markets.
This combined presence creates significant synergies at the distributor and end
user levels. In addition, management believes that the Company is a
technological innovator in a business where a premium is placed on such
innovation.
Band Saw Blades (62% of Metal Cutting Products Pro Forma Net
Sales). Management believes that Simonds is the second largest manufacturer of
metal band saw blades both globally and in North America. Management believes
the Company markets the world's most technologically advanced and complete metal
band saw blade product line with three broad varieties distributed for portable
and stationary band saws. The three varieties include bi-metal, carbide tip and
carbon blades sold under brand names including EPIC(R), Si-Clone(R), Bundle
Band(R), Si-Namic(R) and XL. These products are used on a variety of OEM
vertical and horizontal machines which are generally used in cut-off,
profile/contour and friction cutting applications. In cut-off applications, the
Company's products cut steel and non-ferrous bars from long to shorter lengths
which are ultimately used in finished products. This type of cutting is most
often found in steel mills, steel warehouses and manufacturing plants.
Profile/contour cutting involves the Company's narrower width blades, usually
one-half inch or less, which are used to saw arcs or curves in a wide variety of
materials ranging from sheet metal to tool steel, plastics and wood. Friction
cutting is a method of removing seams and other size overages created by metal
casting using a silicon carbon steel bandsaw blade, running at extremely high
speeds.
The Company's metal band products have a large number of industrial
applications. The largest consumers of these products include the automotive,
construction, home appliance and aerospace industries. Other important end user
markets, particularly in the United States, include specialty manufacturers,
maintenance shops, tool and die shops, machine shops, metal fabricators,
aluminum foundries and steel service centers. End users include General Motors
Corporation, Ford Motor Company, The Boeing Company and The Stanley Works.
Purchasing criteria vary by end user market but generally center around
performance,
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<PAGE> 32
durability and speed, resulting in effective cost per cut. Management believes
the Company offers the highest quality products resulting in the most effective
cost per cut.
The Company continues to expand its comprehensive metal band saw line with
product innovations and designs. End user needs have become more specialized
with demand for particular applications. In 1998, the Company intends to
introduce additional new products, including an improved friction blade for the
investment casting industry with high volume usage applications, and new carbide
tipped products designed for aluminum foundries and for cutting high temperature
alloys.
File Products (31% of Metal Cutting Products Pro Forma Net
Sales). Management believes that Simonds is the second largest manufacturer of
industrial file products in North America and the third largest worldwide. The
Company's files are precision hand tools made from forged, hardened steel, and
are generally used to debur and shape metals and wood. These files are also used
to sharpen many types of cutting blades. In general, the Company sells its file
products under various brand names, including Red Tang(R), Black Maxi-Sharp(R),
Ralston and SI. The Company believes the Simonds' name itself is widely
recognized by industrial/ commercial users as a leader in the manufacture of
high quality files.
The Company's files are sold into two primary end user markets: industrial
and consumer. Industrial end users consist of machinists, millwrights, welders,
gunsmiths, plumbers, electricians, tool and die makers, watchmakers, automobile
body repair and manufacturing as well as many non-ferrous end user applications
such as filing copper, brass and aluminum. Industrial end users of the Company's
file products include General Motors Corporation, Chrysler Corporation, Ford
Motor Company and Jaguar Cars. The consumer end user market, a growing area for
the Company, primarily consists of do-it-yourself users. The Company
manufactures a rapidly expanding line of files which are sold to retail chains
and specialty suppliers such as Sears, Roebuck & Co. (Craftsman), The Stanley
Works and Fiskars under private label brand names. In addition, there are
several niche commercial markets, such as the farrier and formica markets, that
are also important to the Company. Purchasing criteria vary by end user market
but generally center around product availability, design, performance,
durability, and price.
Management believes that the Company's pursuit of innovative new products
and markets complemented by the quality, durability and reliability associated
with the Simonds' Red Tang(R) file will continue to provide excellent
opportunities. The Company introduced four new products in 1997 which address
specific needs within the end user markets: the Spot Welders Tip File, which
enables the user to dress and maintain the tip, thereby maximizing efficiency
and tip life; the MIG Welder Nozzle File, a self-cleaning hollow copper nozzle;
and the Diamond Needle and Diamond Escapement Files, specialty files that are
used on hardened steel.
Wood Cutting Products
The Company believes it is the North American leader in the manufacture of
wood cutting products with net sales of $52.9 million in 1997 on a pro forma
basis. The Company offers a broad array of wood cutting tools, including bandsaw
blades, wood cutting knives, bits and shanks for inserted tooth saws, and large
diameter circular saws. The Company's products are generally used to cut and
shape logs into dimensional lumber and chip lumber for the pulp and paper
industry. In addition, the Company manufactures and sells a complete line of
filing room equipment used primarily in saw mills.
The Company markets its cutting and sawing tools and associated products to
the primary wood industry, including saw mills, pulp mills, wood pallet
producers and plywood, wafer board and particle board plants. End users of the
Company's products include Georgia-Pacific Corporation, International Paper
Company, Louisiana-Pacific Corporation and Weyerhaeuser Company. Purchasing
criteria vary by end user market but generally center around performance,
durability, and effective cost per cut.
The Company continues to build on its breadth of wood cutting products and
accessories. The Company's wood products are designed to minimize kerf loss,
which reduces saw dust, and to maximize log yield. To address these objectives,
the Company has recently introduced automatic saw leveling and tensioning
machines as well as computerized systems to control the feed and speed of saw
mill carriages. These machines enable saw mills to reduce operating costs by
reducing manpower and lowering maintenance costs. In addition,
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<PAGE> 33
the Company's Red Streak(R) product offers a narrow kerf band which, when used
in portable saw mills, increases log yield and reduces operating costs.
Paper Products
The Company is a leading producer of precision steel rules used primarily
in the die making and packaging industries with net sales of $14.5 million in
1997 on a pro forma basis. Manufactured from hardened and beveled steel, rule
products are used to fold, cut and perforate paper, cardboard and other
packaging materials in addition to stamping and bending various types and grades
of sheet metal. The Company's paper products include flat, rotary and perforated
steel rule. Rule products purchasing criteria vary by end user but generally
center around performance, durability and cost.
Paper processors are particularly focused on products that are more easily
formed, maintain sharpness, minimize "dusting" and maximize tool life. Over the
past three years, the Company has introduced new steel rule products that
address each of these concerns, including Mirror Edge(R), Hard Edge and Micro
Perf II. In addition, in May 1998, the Company acquired Notting, a steel rule
products company headquartered in the United Kingdom. This acquisition expands
the Company's steel rule product line and its geographic market penetration.
MARKETING, SALES AND DISTRIBUTION
Management believes that the Company has one of the most extensive and
efficient distribution bases in the industry. The Company's products are
marketed and sold worldwide through an extensive distributor base serviced by
its subsidiaries located in the United States, Canada, Germany, Spain and the
United Kingdom. More than 85% of the Company's sales are through its extensive
independent distributor base. Direct end user shipments and agent channels are
also employed by the Company as dictated by private label programs, specific
geographic markets, industry practice and competition. The Company employs
separate independent distributors for its metal, wood and paper products in
North America and internationally. The Company's marketing and sales functions
are divided geographically between North America and the rest of the world.
The Company's distribution effort is comprised of three major components:
(i) independent distributors, (ii) the Company's field sales force, and (iii)
the Company's customer service representatives.
The Company's sales and distribution base encompasses approximately 3,800
metal products, 1,300 wood products and 200 paper products distributors in North
America and 1,300 metal products, 150 wood products and 200 paper products
distributors internationally. These distributors include mill supply houses, saw
shops, catalog houses, OEMs, welding suppliers and other manufacturers. Because
it offers high quality products and extensive training, service, and technical
support, the Company attracts and retains the industry's most highly coveted
distributors.
The Company's independent distributors are supported by 27 metal product
and 26 wood product representatives in North America and 21 and two,
respectively, internationally. The Company's field sales professionals provide
technical service, in-house formal training and on-going field training to both
distributors and end users.
The Company's 23 customer service representatives in North America and
eight internationally are a critical element of the Company's distribution and
service leadership. By responding to and processing many orders from different
points and providing tailored, real-time service, this group provides a
user-friendly interface with the distributors and end users. Each distributor
and field sales professional is assigned a customer service representative who
is trained in service techniques and has extensive product knowledge.
Steel rule products are marketed through the Notting direct sales force,
independent specialized distributors and Myersco Limited, an independent
representative agency. In addition to this effort, the Company maintains a team
of customer service representatives to market the rule products to smaller
accounts.
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<PAGE> 34
The Company distributes private label products directly to retailers,
including Sears, Roebuck & Co., catalog houses such as McMaster-Carr, and
industrial products marketers such as The Stanley Works and Matco through a
dedicated private label sales manager, supported by the Company's customer
service organization.
The Company distributes certain industrial products through its wholly
owned subsidiary, Strongridge Limited, located in Brampton, Ontario, Canada.
Since its acquisition in 1996, Strongridge has been operating as a separate
division with a separate identity in the industrial market place. The primary
focus of Strongridge has been to sell metal products to the small and mid-size
industrial and contractor distributors. Weld centers and warehouse locations in
Ontario, Canada, Texas, Ohio, California, North Carolina and Georgia provide
local service support to these distributors.
RAW MATERIALS
The primary raw material for the Company's products is specialty steels. In
order to take advantage of volume price discounts, the Company pursues a
"primary" sourcing strategy through which most of the Company's strip steel is
purchased. Designated "primary" sources of steel inventory are supported by
identified secondary sources of raw materials. See "Risk Factors -- Dependence
on Specialty Steels; Reliance on Limited Sources of Supply." Each production
facility is responsible for coordinating and executing the materials for their
respective inventory needs. A purchasing manager at each facility oversees these
purchases.
MANUFACTURING FACILITIES
The following table provides information on the Company's facilities and
the products produced at these locations.
<TABLE>
<CAPTION>
MARKET OWNED/ SIZE
LOCATION SEGMENT PRODUCT TYPES LEASED (SQ. FT) EMPLOYEES
- -------- ------- ------------------------------- ------ -------- ---------
<S> <C> <C> <C> <C> <C>
Fitchburg, MA............... Metal - Weld Edged Bandsaw Blades Owned 401,000 340
- Carbide Tipped Bandsaw Blades
- Carbon Bandsaw Blades
Wood - Bits & Shanks
- Red Streak(R) Bandsaw Blades
Paper - Perforating
- Flat
- Rotary
Big Rapids, MI.............. Wood - Circular Saws Owned 127,500 105
- Knives
- Inserted Tooth Saws
Newcomerstown, OH........... Metal - Files Owned 208,000 130
Springfield, OR............. Wood - Wide Bandsaw Blades Owned 28,400 30
Portland, OR................ Wood - Filing Room Equipment Owned 40,000 98
Riverside, CA............... Paper - Perforating Leased 19,200 24
Tottenham, UK............... Paper - Flat Owned 30,000 42
- Perforating
Barcelona, Spain............ Paper - Rule Leased 4,040 9
Spangenberg, Germany........ Metal - Carbon Bandsaw Blades Owned 57,000 89
- Bi-Metal Bandsaw Blades
- Hacksaw Blades
</TABLE>
Since 1996, the Company has made substantial investments in its
manufacturing equipment and processes and instituted operational improvements
that have generated significant cost savings and productivity increases. The
Company's focused capital spending programs have targeted improvements in
technology, quality control, information systems and manufacturing efficiencies.
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<PAGE> 35
EMPLOYEES
At July 25, 1998, the Company had 938 full-time employees. Of such
employees, 729 were located in the United States, 48 were located in Canada, 87
were located in Germany, 9 were located in Spain and 65 were located in the
United Kingdom. The Company considers its relations with these employees to be
good.
The Fitchburg and Newcomerstown facilities employ members of the United
Steel Workers of America ("USWA") Union. Their contracts with the USWA expire in
2000 and 2001, respectively. The Company considers its relations with the unions
to be good. See "Risk Factors -- Union Contracts."
COMPETITION
The cutting tool market is highly fragmented with numerous participants.
The Company is a leader in the global cutting tools market and is consistently
among the top three competitors in the metal cutting saw blade, file, wood
cutting product and rule product markets. Competition is principally on the
basis of price, service, delivery, quality and technical expertise. The
Company's competitors vary in each of the market sectors it serves. There is no
one company which competes with the Company in all three of the market sectors
served by the Company and there is no one company which is dominant in any of
such market sectors. The Company believes that its reputation over its long
history for quality products, extensive sales and service network and its
in-depth product knowledge provide it with a competitive advantage in all of the
market sectors it services.
ENVIRONMENTAL MATTERS
As with most industrial companies, the Company's facilities and operations
are required to comply with and are subject to a wide variety of federal, state,
local and foreign environment and worker health and safety laws, regulations and
ordinances, including those related to air emissions, wastewater discharges and
chemical and hazardous waste management and disposal ("Environmental Laws").
Certain of these Environmental Laws hold owners or operators of land or
businesses liable for their own and for previous owners' or operators' releases
of hazardous or toxic substances, materials or wastes, pollutants or
contaminants, including petroleum and petroleum products. Compliance with
Environmental Laws also may require the acquisition of permits or other
authorizations for certain activities and compliance with various standards or
procedural requirements. The nature of the Company's operations, the long
history of industrial uses at some of its current or former facilities, and the
operations of predecessor owners or operators of certain of the businesses
expose the Company to risk of liabilities or claims with respect to
environmental and worker health and safety matters. There can be no assurance
that material costs or liabilities will not be incurred in connection with such
liabilities or claims.
In 1992 the Company's property in Ashburnham, Massachusetts, was identified
as having groundwater contamination. The Company has been indemnified from such
liability by prior owners and there is currently $2.7 million held in escrow to
cover such liability. Based on current estimates, management believes that the
amounts held in escrow will be sufficient to cover these environmental
liabilities, although there can be no assurance that such amounts will be
sufficient. In addition, environmental issues were previously identified at the
Company's Fitchburg, Massachusetts, and Newcomerstown, Ohio, properties which
have since been remediated. However, the state of Ohio has not yet issued its
certification to that effect with respect to the Newcomerstown site. The prior
owner has agreed to indemnify the Company for any post-closure care expenses at
the Newcomerstown site. See "Risk Factors -- Environmental Matters."
LITIGATION
The Company is party to a lawsuit that was litigated in China involving a
Chinese joint venture established by the Company's predecessor. This case was
filed by a Chinese joint venture company against the Company and its
predecessor, alleging breach of a sales agreement. Judgment was entered in 1993
against the Company in the approximate amount of $410,000. The plaintiff has
made no effort to enforce its foreign judgment in the U.S. If and when it does
so, the Company will interpose defenses of denial of due process in the Chinese
court, as well as other substantive defenses provided under the Massachusetts
General Laws. Management believes the lawsuit to be without merit. In addition,
the Company is a party to other lawsuits arising in the normal course of
business. In the opinion of management, the final resolutions of these lawsuits
are not expected to materially affect the financial condition or results of
operations of the Company.
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<PAGE> 36
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth certain information with respect to the
directors and executive officers of the Company. Directors serve for a term of
one year or until their successors are elected and qualified.
NAME AGE POSITION
- ---- --- --------
Ross George............. 65 President, Chief Executive Officer and Director
Joseph Sylvia........... 53 Executive Vice President, Chief Financial
Officer and Director
Robert Deedrick......... 55 Vice President -- Manufacturing
Roland Richard.......... 56 Vice President -- Sales and Marketing, Wood
Products
James Palmer............ 57 Vice President -- Sales and Marketing, Metal
Products
Harry Rogers............ 57 Vice President -- International and Rule
Products
Peter Hopper............ 47 Vice President -- Product Development
F.A. DeVilling III...... 56 Vice President and General Manager --
Strongridge
Ron Owens............... 52 Vice President -- Business Development
Habib Gorgi............. 41 Director
Bernard Buonanno III.... 32 Director
Ross George: Mr. George has been President, Chief Operating Officer and
member of the Board of Directors since 1988 and was made Chief Executive Officer
in 1995. Mr. George previously served as acting President and Vice President of
Operations at Simonds Cutting Tools -- Division of Household Manufacturing. Mr.
George joined Simonds in 1983. From 1980 to 1983, he was Vice President and
General Manager of the New England Carbide division of Wallace Murray Corp.
Prior to 1980 he held various positions at Johnson & Johnson and Texas
Instruments.
Joseph Sylvia: Mr. Sylvia has been Chief Financial Officer since 1988 and
is a member of the Board of Directors of Simonds. He was promoted to Executive
Vice President in 1995. Mr. Sylvia formerly held the position of Division
Controller of Simonds Cutting Tools -- Division of Household Manufacturing. He
joined Simonds in 1970 as Senior Programmer Analyst and held various management
positions in Information Services from 1972 to 1982. From 1982 to 1987, Mr.
Sylvia was Director of Finance and Information Services.
Robert Deedrick: Mr. Deedrick has been Vice President of Manufacturing
since 1991. He managed the Fitchburg plant from 1984 to 1991 and the
Newcomerstown operations from 1981 to 1984. Mr. Deedrick joined Simonds in 1973
as an Engineer, progressing through Production and Inventory Control and
Production Management positions.
Roland Richard: Mr. Richard has been Vice President of Sales and
Marketing -- Wood Products since 1991. He previously held the position of
Director of Corporate Development from 1989 to 1991 and was Corporate Sales
Manager of the acquired Michigan Knife Company from 1987 to 1989. Mr. Richard
originally joined Simonds in 1961, progressing through sales, sales management,
product management, and became a Strategic Business Unit Manager in 1980.
James Palmer: Mr. Palmer has been Vice President of Sales and Marketing
for Metal Products since 1995. He was Vice President of Sales of Milford
Products for 10 years. Mr. Palmer joined Milford Products in 1982. Prior to
1982, Mr. Palmer held various sales and management positions with a variety of
companies in the machine tool and cutting tool industries over a period of
approximately 16 years.
Harry Rogers: Mr. Rogers has been Vice President of International and Rule
Products since 1990. He previously held the position of General Sales Manager.
Since joining Simonds in 1971 as a salesman, he has held key positions in sales
and marketing management.
Peter Hopper: Mr. Hopper has been Vice President of Product Development
since 1996. He has held positions of increasing responsibility with Crucible
Specialty Metals from 1976 to 1983. He held research, metallurgy and quality
control positions with Milford Products Corporation from 1983 to 1991. From 1991
to
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<PAGE> 37
1996 he served in various product development and design positions with
Milwaukee Electric Tool Corporation.
F.A. "Skip" DeVilling III: Mr. DeVilling joined Simonds as Vice President
of Business Development in 1995. In 1996, Mr. DeVilling became Vice President
and General Manager of Strongridge Limited, a wholly owned Canadian subsidiary
of Simonds. Mr. DeVilling was formerly Vice President of Sales and Marketing for
Columbus McKinnon Corporation from 1992 to 1995 and Vice President of Sales and
Marketing for National Twist Drill Division of Regal Beloit Corporation from
1986 to 1992. Prior to 1986, Mr. DeVilling worked for the Baystate Abrasives
Division of Dresser Industries in various sales and marketing management
positions, including National Sales Manager form 1979 to 1985.
Ron Owens: Mr. Owens joined Simonds in 1998 as Vice President of Business
Development. In 1990 Mr. Owens formed "SAWELL, INC", a manufacturing business
that produced jigsaw and recip blades for their own brand, as well as private
label product for all major brands. Black and Decker purchased "SAWELL, INC" in
late 1994 and Mr. Owens was President of the subsidiary until October 1996. Mr.
Owens was Vice President of Operations at Allen Industrial from 1965 to 1978;
Executive Vice President of Mid State Industrial from 1978 to 1982; and owned a
sales rep agency in Tampa, Florida prior to starting "SAWELL, INC".
Habib Gorgi: Mr. Gorgi has been a member of the Board of Directors since
1995. Since 1995, Mr. Gorgi has been President of each of (i) Fleet Ventures
Resources, Inc., (ii) Fleet Growth Resources II, Inc., a general partner of
Fleet Equity Partners VI, L.P., and (iii) Silverado III, Corp., the general
partner of Silverado III, L.P., the general partner of Chisholm Partners III,
L.P. Mr. Gorgi is also managing general partner of Kennedy Plaza Partners. Since
1986, Mr. Gorgi has held various management positions with Fleet Equity Partners
and its affiliates. Prior to 1986, he had worked in the Mergers, Acquisitions
and Leveraged Buyouts Group of BankAmerica. Mr. Gorgi serves on the Board of
Directors of several Fleet Equity Partners' portfolio companies.
Bernard Buonanno: Mr. Buonanno has been a member of the Board of Directors
since 1995. Since 1998, Mr. Buonanno has been Senior Vice President of each of
(i) Fleet Venture Resources, Inc., (ii) Fleet Growth Resources, Inc., a general
partner of Fleet Equity Partners VI, L.P., and (iii) Silverado III, Corp., the
general partner of Silverado III, L.P., the general partner of Chisholm Partners
III, L.P. Mr. Buonanno is also general partner of Kennedy Plaza Partners. Mr.
Buonanno has held various positions with Fleet Equity Partners and its
affiliates since 1993. Prior to joining Fleet Equity Partners in 1993, Mr.
Buonanno worked in the Mergers and Acquisitions Department of Prudential-Bache
Capital Funding. Mr. Buonanno serves on the Board of Directors of several Fleet
Equity Partners' portfolio companies.
DIRECTOR COMPENSATION AND ARRANGEMENTS
Each non-employee director currently receives fees of $25,000 per year plus
reimbursement of out-of-pocket expenses. Directors who are employees receive no
additional compensation for serving as a director.
33
<PAGE> 38
EXECUTIVE COMPENSATION
The following table sets forth all cash compensation earned in 1997 by the
Company's Chief Executive Officer and each of the four most highly compensated
executive officers whose remuneration exceeded $100,000 (the "Named
Executives").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION ALL OTHER
-------------------- ---------------------------
NAME AND POSITION SALARY BONUS OTHER(1) COMPENSATION(2)
- ----------------- -------- -------- -------- ---------------
<S> <C> <C> <C> <C>
Ross George................................. $262,080 $262,080 $20,895 $17,102
Chief Executive Officer, President
Joseph Sylvia............................... $178,605 $142,884 $16,958 $11,324
Executive Vice President, CFO
Robert Deedrick............................. $126,200 $ 75,720 $ 8,206 $ 8,683
Vice President -- Manufacturing
James Palmer................................ $120,935 $ 47,013 $ 7,553 $ 8,829
Vice President -- Sales & Marketing,
Metal Products
Roland Richard.............................. $116,844 $ 70,106 $ 7,617 $ 8,667
Vice President -- Sales & Marketing,
Wood Products
</TABLE>
- ---------------
(1) Consists of amounts reimbursed during the year for the payment of taxes
relating to company vehicles, tax preparation and club memberships.
(2) Consists of the Company's contributions to the 401(k) Plan (Messrs. George
and Sylvia, $4,750; Mr. Deedrick, $3,786; Mr. Palmer, $3,628; and Mr.
Richard, $3,505) and the profit-sharing plan (Messrs. George and Sylvia,
$4,800; Mr. Deedrick, $3,786; Mr. Palmer, $3,628; and Mr. Richard, $3,505),
and group insurance payments (Mr. George, $7,552; Mr. Sylvia, $1,774; Mr.
Deedrick $1,111; Mr. Palmer, $1,573; and Mr. Richard, $1,656).
Options
No options were granted in the year ended December 27, 1997 to the Named
Executives. The following table sets forth certain information with respect to
unexercised options to purchase the Company's Common Stock which were granted in
connection with the acquisition of the Company in May 1995. These options, which
were immediately exercisable at $400 per share, were repurchased by the Company
at a value of $458.52 per share less the exercise price in connection with the
Recapitalization. See "Certain Transactions."
FY-END OPTION VALUES
<TABLE>
<CAPTION>
VALUE OF UNEXERCISED
NO. OF SECURITIES UNDERLYING IN-THE-MONEY
UNEXERCISED OPTIONS AT FY-END OPTIONS AT FY-END(1)
----------------------------- -----------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Ross George............................ 12,301.79 0 $719,900.75 0
Joseph Sylvia.......................... 8,201.20 0 $479,934.22 0
Robert Deedrick........................ 2,050.30 0 $119,983.55 0
James Palmer........................... 2,050.30 0 $119,983.55 0
Roland Richard......................... 2,050.30 0 $119,983.55 0
</TABLE>
- ---------------
(1) Based on the equity value per share being paid in connection with the
Recapitalization ($458.52).
The Company adopted the Amended and Restated 1998 Stock Incentive Plan in
July 1998 pursuant to which key employees (including officers who are also
directors of the Company) will be eligible for discretionary awards of stock
options at the discretion of the Board of Directors. The terms and prices of
34
<PAGE> 39
options granted will be in the discretion of the Board. Messrs. George and
Sylvia were granted options in July 1998 to purchase 351.13 and 222.45 shares,
respectively, of Common Stock at a price of $458.52 per share.
Employment Contracts
Messrs. George and Sylvia each entered into employment agreements with the
Company which expire May 26, 2000, subject to extension. The employment
agreements provide for base salaries and bonuses as determined by the Board of
Directors. In addition, the agreements provide that in the event of termination
of employment by the Company for any reason other than cause, the officer is
entitled to receive all salary and bonuses earned through the termination date
plus the remaining base salary for one year.
Messrs. Deedrick, Palmer, Richard and Rogers have also entered into
employment agreements with the Company which provide for one year's notice of
termination from the Company, and 90 days notice of termination from the
employee, except in the case of cause, in which event the agreement is
terminable on 30 days notice from the Company. The agreements provide that the
officers' base salary and bonuses will be determined by the Board. Each of these
agreements contains a covenant not to compete for two years after termination of
employment.
35
<PAGE> 40
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the beneficial
ownership of the Company's voting Common Stock (i) by each person known to the
Company to own more than 5% of the Company's voting Common Stock and (ii) by
each director of the Company, each of the executive officers of the Company
listed under "Management" and the directors and executive officers of the
Company as a group.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY OWNED(1)
------------------------------
NUMBER OF SHARES % OF CLASS
---------------- ----------
<S> <C> <C>
Fleet Venture Resources, Inc.(2).......................... 22,118.93 31.3
Fleet Equity Partners VI, L.P.(2)......................... 9,479.54 13.4
Chisholm Partners III, L.P.(2)............................ 8,014.92 11.4
Kennedy Plaza Partners.................................... 461.20 *
Private Market Fund, L.P. ................................ 8,723.72 12.7
Ross George............................................... 6,348.69 7.3
Joseph Sylvia............................................. 4,039.09 5.9
Robert Deedrick........................................... 436.19 *
Roland Richard............................................ 1,090.46 1.6
James Palmer.............................................. 381.66 *
Harry Rogers.............................................. 1,090.46 1.6
Peter Hopper.............................................. 163.57 *
F.A. DeVilling............................................ 218.09 *
Ron Owens................................................. -- --
Habib Gorgi(2)............................................ 40,074.59 56.7
Bernard Buonanno(2)....................................... 40,074.59 56.7
All directors and executive officers as a group, including
the above named persons(2).............................. 53,842.79 75.6
</TABLE>
- ---------------
* Less than 1%
(1) As used in this table, beneficial ownership means the sole or shared power
to vote, or to direct the voting of, a security or the sole or shared power
to dispose, or direct the disposition of, a security, and includes options
and warrants exercisable within 60 days.
(2) Fleet Venture Resources, Inc. ("FVR"), Fleet Equity Partners VI, L.P.
("FEP"), Chisholm Partners III ("Chisholm") and Kennedy Plaza Partners
("Kennedy") are affiliated entities. As a result, they may be deemed to have
shared voting and investment power of the shares held by each of the other
entities. FVR and FEP are also affiliates of Fleet Financial Group, Inc.
("FFG"). As a result, FFG may be deemed to have shared voting and investment
power of the shares held by such entities. Mr. Gorgi is President of FVR and
of the corporate general partners of FEP and Chisholm, and a managing
general partner of Kennedy. As a result, he may be deemed to have shared
voting and investment power of the shares held by such entities. Mr.
Buonanno is Senior Vice President of FVR and of the corporate general
partners of FEP and Chisholm, and a general partner of Kennedy. As a result,
he may be deemed to have shared voting and investment power of the shares
held by such entities. Messrs. Gorgi and Buonanno disclaim beneficial
ownership for all shares held directly by these entities.
36
<PAGE> 41
CERTAIN TRANSACTIONS
The Original Offering was made in connection with a recapitalization (the
"Recapitalization") of the Company pursuant to which (i) the Company repurchased
certain of its outstanding equity securities for an aggregate purchase price of
$58.9 million (or $458.52 per share of Common Stock and equivalents) (the
"Recapitalization Consideration"), (ii) the Company issued new shares of voting
and non-voting Common Stock to certain existing stockholders and new investors
with aggregate proceeds to the Company of $19.4 million (or $458.52 per share)
(the "New Shares"), (iii) the Company issued certain warrants and options to
certain existing stockholders and new investors, and (iv) certain of the
Company's existing stockholders retained voting Common Stock with an aggregate
value (based on per share value of $458.52) of approximately $15.6 million (the
"Retained Shares").
Fleet (i) received approximately $39.0 million of the Recapitalization
Consideration, (ii) purchased approximately $7.8 million of the New Shares and
(iii) retained approximately $9.6 million of the Retained Shares. In addition,
Fleet received (a) warrants to purchase 2,180.93 shares of Common Stock at a
price of $458.52 per share and (b) warrants to purchase 1,357.73 shares of
Common Stock at a price of $458.52 per share which will be exercisable in full
upon the occurrence of a sale of the Company or an initial public offering of
its stock ("Liquidity Events") if Fleet does not earn a specified return on its
cash investment in the Company.
Management of the Company (i) received approximately $16.0 million of the
Recapitalization Consideration, (ii) purchased approximately $0.9 million of the
New Shares and (iii) retained approximately $5.8 million of the Retained Shares.
Messrs. George, Sylvia, Deedrick and Richard (or members of their respective
families) received approximately $7.0 million, $3.4 million, $0.9 million and
$1.2 million, respectively, of such Recapitalization Consideration. Mr. Palmer
purchased approximately $0.2 million of such New Shares, and Messrs. George,
Sylvia, Deedrick and Richard retained approximately $2.8 million, $1.8 million,
$0.2 million and $0.5 million, respectively, of such Retained Shares. In
addition, Messrs. George and Sylvia were granted options to purchase 351.13 and
222.45 shares, respectively, of Common Stock at a price of $458.52 per share.
First Union Investors, Inc., an affiliate of First Union Capital Partners,
one of the Initial Purchasers, and First Union National Bank, the principal
lender under the Senior Credit Facility, acquired 3,373.75 voting and 7,530.90
non-voting New Shares for approximately $5 million and also received warrants to
purchase 391.57 shares of Common Stock at a price of $458.52 per share which
will be exercisable in full upon the occurrence of certain Liquidity Events if
the holder does not earn a specified return on its cash investment in the
Company. The Private Market Fund, L.P. received warrants to purchase 313.26
shares of Common Stock at a price of $458.52 per share which will be exercisable
in full upon the occurrence of certain Liquidity Events if the holder does not
earn a specified return on its cash investment in the Company.
DESCRIPTION OF SENIOR DEBT
The following is a summary of certain Senior Debt of the Company. To the
extent such summary contains descriptions of the Senior Credit Facility and
other loan documents, such descriptions do not purport to be complete and are
qualified in their entirety by reference to such documents, which are available
upon request from the Company.
SENIOR CREDIT FACILITY
On July 7, 1998, the Company entered into an agreement with First Union
National Bank (the "Bank") providing for a revolving credit facility (the
"Senior Credit Facility") to the Company for up to $30.0 million of revolving
loans. Borrowings under the Senior Credit Facility are available for permitted
acquisitions and working capital, including letters of credit. The Senior Credit
Facility is secured by first priority liens on all tangible and intangible
personal property and real property assets of the Company and its subsidiaries.
The Senior Credit Facility expires in 2003, unless extended. The interest
rate per annum applicable to the Senior Credit Facility is, at the Company's
option, either LIBOR or the greater of the prime rate or the overnight federal
funds rate plus 0.50%, in each case plus 0.125% to 2.375% depending on the
Company's
37
<PAGE> 42
financial leverage (the "Applicable Margin"). The Company is required to pay
certain fees in connection with the Senior Credit Facility, including a
commitment fee of 0.50% initially and thereafter at a per annum rate equal to
the Applicable Margin on the unutilized portion of the revolver.
The Senior Credit Facility also contains certain other terms and
conditions, covenants and events of default.
FOREIGN DEBT
The Company's German subsidiary has a term loan in the principal amount of
DM 4.2 million and a working capital line facility with a maximum aggregate
limit of DM 5.5 million. The term loan expires and the working capital line
terminates on December 31, 1999. Interest rates on both the term loan and the
working capital line are based on the Frankfurt Interbank Offer Rate. The term
loan may be prepaid without premium or penalty in minimum multiples of DM
100,000 upon one month's advance notice.
Simonds UK Holdings Ltd., a British subsidiary of the Company, issued a
series of promissory notes in the aggregate principal amount of L1,000,000 (the
"UK Notes") in favor of the former shareholders of Notting as a portion of the
purchase price. The UK Notes, which mature April 30, 1999, bear interest at a
rate of 8.5% per annum. The payment of the UK Notes is guaranteed by the
Company.
The Company's Notting subsidiary has the following outstanding
indebtedness: (i) a business development loan with National Westminster Bank in
the amount of L44,139 as of July 31, 1998 bearing interest at 10% per annum and
maturing June 7, 1999; (ii) a demand note with National Westminster Bank in the
amount of L200,000 bearing interest at 2 1/2% above the bank's base rate and
maturing December 31, 1998; (iii) a revolving line of credit with Wells Fargo
Bank in the amount of $1.2 million bearing interest at 1% above the bank's prime
rate and maturing March 31, 1999; (iv) a credit facility with Banco Sabadell of
Spain in the amount of 26 million pesetas bearing interest at rates ranging from
6.35% to 10%; (v) an overdraft line with Central Hispano Bank of Spain in the
amount of 5 million pesetas bearing interest at a rate of MIBOR plus 1.5%; and
(vi) a loan with National Westminster Bank in the amount of L26,709 for the
purchase of fixed assets bearing interest at 2 1/2% above the bank's base rate
and maturing August 1, 2000.
38
<PAGE> 43
DESCRIPTION OF EXCHANGE NOTES
The Exchange Notes will be issued under the Indenture. The following
summary of certain provisions of the Indenture does not purport to be complete
and is subject to, and is qualified in its entirety by reference to, the Trust
Indenture Act of 1939, as amended (the "TIA"), and to all of the provisions of
the Indenture, including the definitions of certain terms therein and those
terms made a part of the Indenture by reference to the TIA as in effect on the
date of the Indenture. A copy of the Indenture may be obtained from the Company
or the Initial Purchasers. The definitions of certain capitalized terms used in
the following summary are set forth below under "-- Certain Definitions." For
purposes of this section, references to the "Company" include only Simonds
Industries Inc. and not its Subsidiaries.
The Exchange Notes will be unsecured obligations of the Company, ranking
subordinate in right of payment to all Senior Debt of the Company.
The Exchange Notes will be issued in fully registered form only, without
coupons, in denominations of $1,000 and integral multiples thereof. Initially,
the Trustee will act as Paying Agent and Registrar for the Exchange Notes. The
Exchange Notes may be presented for registration or transfer and exchange at the
offices of the Registrar, which initially will be the Trustee's corporate trust
office. The Company may change any Paying Agent and Registrar without notice to
holders of the Exchange Notes (the "Holders"). The Company will pay principal
(and premium, if any) on the Exchange Notes at the Trustee's corporate office in
New York, New York. At the Company's option, interest may be paid at the
Trustee's corporate trust office or by check mailed to the registered address of
the Holders. Any Notes that remain outstanding after the completion of the
Exchange Offer, together with the Exchange Notes, will be treated as a single
class of securities under the Indenture.
PRINCIPAL, MATURITY AND INTEREST
The Notes are limited in aggregate principal amount to $150,000,000, of
which $100,000,000 will be issued on the Issue Date, and will mature on July 1,
2008. Interest on the Notes will accrue at the rate of 10 1/4% per annum and
will be payable semiannually in cash on each January 1 and July 1 commencing on
January 1, 1999, to the persons who are registered Holders at the close of
business on the December 15 and June 15 immediately preceding the applicable
interest payment date. Interest on the Notes will accrue from and including the
most recent date to which interest has been paid or, if no interest has been
paid, from and including the date of issuance.
The Notes will not be entitled to the benefit of any mandatory sinking
fund.
REDEMPTION
Optional Redemption. The Exchange Notes will be redeemable, at the
Company's option, in whole at any time or in part from time to time, on and
after July 1, 2003, upon not less than 30 nor more than 60 days' notice, at the
following redemption prices (expressed as percentages of the principal amount
thereof) if redeemed during the twelve-month period commencing on July 1 of the
applicable year set forth below, plus, in each case, accrued and unpaid
interest, if any, thereon to the date of redemption:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
---- ----------
<S> <C>
2003................................................. 105.125%
2004................................................. 103.417%
2005................................................. 101.708%
2006 and thereafter.................................. 100.000%
</TABLE>
Optional Redemption upon Public Equity Offerings. At any time, or from
time to time, on or prior to July 1, 2001, the Company may, at its option, use
the net cash proceeds of one or more Public Equity Offerings (as defined below)
to redeem up to 35% of the Notes issued at a redemption price equal to 110.250%
of the principal amount thereof plus accrued and unpaid interest, if any,
thereon to the date of redemption; provided that at least 65% of the principal
amount of Notes issued remains outstanding immediately after any such
redemption. In order to effect the foregoing redemption with the proceeds of any
39
<PAGE> 44
Public Equity Offering, the Company shall make such redemption not more than 90
days after the consummation of any such Public Equity Offering.
As used in the preceding paragraph, "Public Equity Offering" means an
underwritten public offering of Qualified Capital Stock of the Company pursuant
to a registration statement filed with the Commission in accordance with the
Securities Act.
SELECTION AND NOTICE OF REDEMPTION
In the event that less than all of the Notes are to be redeemed at any
time, selection of such Notes for redemption will be made by the Trustee in
compliance with the requirements of the principal national securities exchange,
if any, on which such Notes are listed or, if such Notes are not then listed on
a national securities exchange, on a pro rata basis, by lot or by such method as
the Trustee shall deem fair and appropriate; provided, however, that no Notes of
a principal amount of $1,000 or less shall be redeemed in part; provided,
further, that if a partial redemption is made with the proceeds of a Public
Equity Offering, selection of the Notes or portions thereof for redemption shall
be made by the Trustee only on a pro rata basis or on as nearly a pro rata basis
as is practicable (subject to DTC procedures), unless such method is otherwise
prohibited. Notice of redemption shall be mailed by first-class mail at least 30
but not more than 60 days before the redemption date to each Holder of Notes to
be redeemed at its registered address. If any Exchange Note is to be redeemed in
part only, the notice of redemption that relates to such Note shall state the
portion of the principal amount thereof to be redeemed. A new Exchange Note in a
principal amount equal to the unredeemed portion thereof will be issued in the
name of the Holder thereof upon cancellation of the original Exchange Note. On
and after the redemption date, interest will cease to accrue on Notes or
portions thereof called for redemption as long as the Company has deposited with
the Paying Agent funds in satisfaction of the applicable redemption price
pursuant to the Indenture.
SUBORDINATION
The payment of all Obligations on the Exchange Notes is subordinated in
right of payment to the prior payment in full in cash or Cash Equivalents of all
Obligations on Senior Debt. Upon any payment or distribution of assets of the
Company of any kind or character, whether in cash, property or securities, to
creditors upon any liquidation, dissolution, winding up, reorganization,
assignment for the benefit of creditors or marshaling of assets of the Company
or in a bankruptcy, reorganization, insolvency, receivership or other similar
proceeding relating to the Company or its property, whether voluntary or
involuntary, all Obligations due upon all Senior Debt shall first be paid in
full in cash or Cash Equivalents, or such payment duly provided for to the
satisfaction of the holders of Senior Debt, before any payment or distribution
of any kind or character is made on account of any Obligations on the Notes, or
for the acquisition of any of the Notes for cash or property or otherwise. If
any default occurs and is continuing in the payment when due, whether at
maturity, upon any redemption, by declaration or otherwise, of any principal of,
interest on, unpaid drawings for letters of credit issued in respect of, or
regularly accruing fees with respect to, any Senior Debt, no payment of any kind
or character shall be made by or on behalf of the Company or any other Person on
its behalf with respect to any Obligations on the Notes or to acquire any of the
Notes for cash or property or otherwise. In addition, if any other event of
default occurs and is continuing with respect to any Designated Senior Debt, as
such event of default is defined in the instrument creating or evidencing such
Designated Senior Debt, permitting the holders of such Designated Senior Debt
then outstanding to accelerate the maturity thereof and if the Representative
for such Designated Senior Debt gives written notice of the event of default to
the Trustee (a "Default Notice"),then, unless and until all events of default
with respect to such Designated Senior Debt have been cured or waived or have
ceased to exist or the Trustee receives notice from the Representative for such
Designated Senior Debt terminating the Blockage Period (as defined below),
during the 180 days after the delivery of such Default Notice (the "Blockage
Period"), neither the Company nor any other Person on its behalf shall (x) make
any payment of any kind or character with respect to any Obligations on the
Notes or (y) acquire any of the Notes for cash or property or otherwise.
Notwithstanding anything herein to the contrary, in no event will a Blockage
Period extend beyond 180 days from the date the Default Notice was delivered to
the Trustee and only one such Blockage Period may be commenced within any 360
40
<PAGE> 45
consecutive days. No event of default which existed or was continuing on the
date of the commencement of any Blockage Period with respect to the Designated
Senior Debt shall be, or be made, the basis for commencement of a second
Blockage Period by the Representative of such Designated Senior Debt whether or
not after a period of 360 consecutive days, unless such event of default shall
have been cured or waived or ceased to exist for a period of not less than 90
consecutive days (it being acknowledged that any subsequent action, or any
breach of any financial covenants for a period commencing after the date of
commencement of such Blockage Period that, in either case, would give rise to an
event of default pursuant to any provisions of the Designated Senior Debt under
which an event of default previously existed or was continuing shall constitute
a new event of default for this purpose).
By reason of such subordination, in the event of the insolvency of the
Company, creditors of the Company who are not holders of Senior Debt, including
the Holders of the Notes, may recover less, ratably, than holders of Senior
Debt.
GUARANTEES
The Exchange Notes will be guaranteed by each of the Company's Domestic
Wholly Owned Restricted Subsidiaries on the Issue Date and by certain of the
Company's Restricted Subsidiaries formed or acquired after the Issue Date. See
"Certain Covenants -- Issuance of Subsidiary Guarantees." The Guarantee of each
Guarantor will be subordinated to all Guarantor Senior Debt of such Guarantor to
the same extent as the Notes are subordinated to all Senior Debt. In the event
all of the Capital Stock of a Guarantor owned by the Company and the Restricted
Subsidiaries is sold by the Company and/or one or more Restricted Subsidiaries
or all or substantially all of the assets of a Guarantor are sold by such
Guarantor and the sale complies with the provisions set forth under "Certain
Covenants -- Limitation on Asset Sales," such Guarantor's Guarantee will be
released.
CHANGE OF CONTROL
The Indenture provides that upon the occurrence of a Change of Control,
each Holder will have the right to require that the Company purchase all or a
portion of such Holder's Exchange Notes pursuant to the offer described below
(the "Change of Control Offer"), at a purchase price equal to 101% of the
principal amount thereof plus accrued interest, if any, thereon to the date of
purchase.
The Indenture provides that, prior to the mailing of the notice referred to
below, but in any event within 30 days following any Change of Control, the
Company covenants to (i) repay in full and terminate all commitments under all
Indebtedness under the Credit Agreement and all other Senior Debt the terms of
which require repayment upon a Change of Control or offer to repay in full and
terminate all commitments under all Indebtedness under the Credit Agreement and
all other such Senior Debt and to repay the Indebtedness owed to each lender
which has accepted such offer or (ii) obtain the requisite consents under the
Credit Agreement and all other Senior Debt to permit the repurchase of the
Exchange Notes as provided below. The Company shall first comply with the
covenant in the immediately preceding sentence before it shall be required to
repurchase Exchange Notes pursuant to the provisions described below.
Within 30 days following the date upon which the Change of Control
occurred, the Company must send, by first class mail, a notice to each Holder,
with a copy to the Trustee, which notice shall govern the terms of the Change of
Control Offer. Such notice shall state, among other things, the purchase date,
which must be no earlier than 30 days nor later than 60 days from the date such
notice is mailed, other than as may be required by law (the "Change of Control
Payment Date"). Holders electing to have an Exchange Note purchased pursuant to
a Change of Control Offer will be required to surrender the Exchange Note, with
the form entitled "Option of Holder to Elect Purchase" on the reverse of the
Exchange Note completed, to the Paying Agent at the address specified in the
notice prior to the close of business on the third Business Day prior to the
Change of Control Payment Date.
If a Change of Control Offer is required to be made, there can be no
assurance that the Company will be permitted by the terms of its Senior Debt to
make such a Change of Control Offer or that it have available funds sufficient
to pay the Change of Control purchase price for all the Notes that might be
delivered by
41
<PAGE> 46
Holders seeking to accept the Change of Control Offer. In the event the Company
is required to purchase outstanding Notes pursuant to a Change of Control Offer,
the Company expects that it would seek third party financing to the extent it
does not have available funds to meet its purchase obligations. However, there
can be no assurance that the Company would be able to obtain such financing.
Neither the Board of Directors of the Company nor the Trustee may waive the
covenant relating to a Holder's right to require the purchase of Exchange Notes
upon a Change of Control. Restrictions in the Indenture described herein on the
ability of the Company and the Restricted Subsidiaries to incur additional
Indebtedness, to grant liens on its property, to make Restricted Payments and to
make Asset Sales may also make more difficult or discourage a takeover of the
Company, whether favored or opposed by the management of the Company.
Consummation of any such transaction in certain circumstances may require the
purchase of the Exchange Notes, and there can be no assurance that the Company
or the acquiring party will have sufficient financial resources to effect such
purchase. Such restrictions and the restrictions on transactions with Affiliates
may, in certain circumstances, make more difficult or discourage any leveraged
buyout of the Company or any of its Subsidiaries by the management of the
Company. While such restrictions cover a wide variety of arrangements which have
traditionally been used to effect highly leveraged transactions, the Indenture
may not afford the Holders of Exchange Notes protection in all circumstances
from the adverse aspects of a highly leveraged transactions, reorganization,
restructuring, merger or similar transaction.
The Company will comply with the requirements of Rule 14e-1 under the
Exchange Act and any other securities laws and regulations thereunder to the
extent such laws and regulations are applicable in connection with a Change of
Control Offer. To the extent that the provisions of any securities laws or
regulations conflict with the "Change of Control" provisions of the Indenture,
the Company shall comply with the applicable securities laws and regulations and
shall not be deemed to have breached its obligations under the "Change of
Control" provisions of the Indenture by virtue thereof.
CERTAIN COVENANTS
The Indenture contains, among others, the following covenants:
Limitation on Incurrence of Additional Indebtedness. The Company will not,
and will not permit any of the Restricted Subsidiaries to, directly or
indirectly, create, incur, assume, guarantee, acquire, become liable,
contingently or otherwise, with respect to, or otherwise become responsible for
payment of (collectively, "incur") any Indebtedness (other than Permitted
Indebtedness); provided, however, that if no Default or Event of Default shall
have occurred and be continuing at the time of or as a consequence of the
incurrence of any such Indebtedness, the Company or any Guarantor may incur
Indebtedness (including, without limitation, Acquired Indebtedness) and the
Restricted Subsidiaries may incur Acquired Indebtedness, in each case if on the
date of the incurrence of such Indebtedness, after giving effect to the
incurrence thereof, the Consolidated Fixed Charge Coverage Ratio of the Company
is greater than 2.0 to 1.0.
No Indebtedness incurred pursuant to the Consolidated Fixed Charge Coverage
Ratio test of the preceding paragraph (including, without limitation,
Indebtedness under the Credit Agreement) shall reduce the amount of Indebtedness
which may be incurred pursuant to any clause of the definition of Permitted
Indebtedness (including without limitation, Indebtedness under the Credit
Agreement pursuant to clause (ii) of the definition of Permitted Indebtedness).
Limitation on Restricted Payments. The Company will not, and will not
cause or permit any of the Restricted Subsidiaries to, directly or indirectly,
(a) declare or pay any dividend or make any distribution (other than dividends
or distributions payable in Qualified Capital Stock of the Company) on or in
respect of shares of the Company's Capital Stock to holders of such Capital
Stock (including by means of a Person (including an Unrestricted Subsidiary)
making such a payment with the proceeds of an Investment made by the Company or
any Restricted Subsidiary), (b) purchase, redeem or otherwise acquire or retire
for value any Capital Stock of the Company or any warrants, rights or options to
purchase or acquire shares of any class of such Capital Stock (including by
means of a Person (including an Unrestricted Subsidiary) making such a payment
with the proceeds of an Investment made by the Company or any Restricted
Subsidiary) or (c) make any Investment (other than Permitted Investments) (each
of the foregoing actions set forth in
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clauses (a), (b) and (c) being referred to as a "Restricted Payment"), if at the
time of such Restricted Payment or immediately after giving effect thereto, (i)
a Default or an Event of Default shall have occurred and be continuing or (ii)
the Company is not able to incur at least $1.00 of additional Indebtedness
(other than Permitted Indebtedness) in compliance with the covenant described
under "-- Limitation on Incurrence of Additional Indebtedness" or (iii) the
aggregate amount of Restricted Payments (including such proposed Restricted
Payment) made subsequent to the Issue Date (the amount expended for such
purpose, if other than in cash, being the fair market value of such property as
determined reasonably and in good faith by the Board of Directors of the
Company) shall exceed the sum of: (w) 50% of the cumulative Consolidated Net
Income (or if cumulative Consolidated Net Income shall be a loss, minus 100% of
such loss) of the Company earned subsequent to the Issue Date and through the
end of the most recent fiscal quarter for which financial statements are
available prior to the date such Restricted Payment occurs (the "Reference
Date") (treating such period as a single accounting period); plus (x) 100% of
the fair market value of the aggregate net proceeds received by the Company from
any Person (other than a Subsidiary of the Company) from the issuance and sale
subsequent to the Issue Date and on or prior to the Reference Date of Qualified
Capital Stock of the Company or of other securities converted to Qualified
Capital Stock of the Company; plus (y) without duplication of any amounts
included in clause (iii)(x) above, 100% of the fair market value of the
aggregate net proceeds of any contribution to the common equity capital of the
Company received by the Company from a holder of the Company's Capital Stock
(excluding, in the case of clauses (iii)(x) and (y), any net proceeds from a
Public Equity Offering to the extent used to redeem the Notes); plus (z) an
amount equal to the lesser of (A) the sum of the fair market value of the
Capital Stock of an Unrestricted Subsidiary owned by the Company and/or the
Restricted Subsidiaries and the aggregate amount of all Indebtedness of such
Unrestricted Subsidiary owed to the Company and each Restricted Subsidiary on
the date of Revocation of such Unrestricted Subsidiary as an Unrestricted
Subsidiary in accordance with the covenant described under "-- Limitation on
Designations of Unrestricted Subsidiaries" or (B) the Designation Amount with
respect to such Unrestricted Subsidiary on the date of the Designation of such
Subsidiary as an Unrestricted Subsidiary in accordance with the covenant
described under "-- Limitation on Designations of Unrestricted Subsidiaries."
Notwithstanding the foregoing, the provisions set forth in the immediately
preceding paragraph do not prohibit: (1) the payment of any dividend within 60
days after the date of declaration of such dividend if the dividend would have
been permitted on the date of declaration; (2) the acquisition of any shares of
Capital Stock of the Company, either (i) solely in exchange for shares of
Qualified Capital Stock of the Company or (ii) through the application of net
proceeds of a substantially concurrent sale for cash (other than to a Subsidiary
of the Company) of shares of Qualified Capital Stock of the Company; (3) so long
as no Default or Event of Default shall have occurred and be continuing,
repurchases of Capital Stock (or options therefor) of the Company from officers,
directors, employees or consultants pursuant to equity ownership or compensation
plans or stockholders agreements not to exceed $1.0 million in any year; (4) so
long as no Default or Event of Default shall have occurred and be continuing,
other Restricted Payments in an aggregate amount not to exceed $5.0 million; and
(5) Restricted Payments made on the Issue Date in connection with the
Recapitalization Distribution. In determining the aggregate amount of Restricted
Payments made subsequent to the Issue Date in accordance with clause (iii) of
the immediately preceding paragraph, amounts expended pursuant to clauses (1),
(2), (3) and (4) shall be included in such calculation.
Limitation on Asset Sales. The Company will not, and will not permit any
of the Restricted Subsidiaries to, consummate an Asset Sale unless (i) the
Company or the applicable Restricted Subsidiary, as the case may be, receives
consideration at the time of such Asset Sale at least equal to the fair market
value of the assets sold or otherwise disposed of (as determined in good faith
by the Company's Board of Directors), (ii) at least 75% of the consideration
received by the Company or the Restricted Subsidiary, as the case may be, from
such Asset Sale shall be in the form of cash, Cash Equivalents and/or
Replacement Assets and is received at the time of such disposition; and (iii)
upon the consummation of an Asset Sale, the Company shall apply, or cause such
Restricted Subsidiary to apply, the Net Cash Proceeds relating to such Asset
Sale within 360 days of receipt thereof either (A) to prepay any Senior Debt or
Guarantor Senior Debt and, in the case of any Senior Debt or Guarantor Senior
Debt under any revolving credit facility, effect a permanent reduction in the
availability under such revolving credit facility, (B) to acquire Replacement
Assets, or (C) a combination
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of prepayment and investment permitted by the foregoing clauses (iii)(A) and
(iii)(B). On the 361st day after an Asset Sale or such earlier date, if any, as
the Board of Directors of the Company or of such Restricted Subsidiary
determines not to apply the Net Cash Proceeds relating to such Asset Sale as set
forth in clauses (iii)(A), (iii)(B) and (iii)(C) of the next preceding sentence
(each, a "Net Proceeds Offer Trigger Date"), such aggregate amount of Net Cash
Proceeds which have not been applied on or before such Net Proceeds Offer
Trigger Date as permitted in clauses (iii)(A), (iii)(B) and (iii)(C) of the next
preceding sentence (each a "Net Proceeds Offer Amount") shall be applied by the
Company to make an offer to purchase (the "Net Proceeds Offer") on a date (the
"Net Proceeds Offer Payment Date") not less than 30 nor more than 60 days
following the applicable Net Proceeds Offer Trigger Date, from all Holders on a
pro rata basis, that principal amount of Notes equal to the Net Proceeds Offer
Amount at a price equal to 100% of the principal amount of the Notes to be
purchased, plus accrued and unpaid interest, if any, thereon to the date of
purchase; provided, however, that if at any time any non-cash consideration
received by the Company or any Restricted Subsidiary, as the case may be, in
connection with any Asset Sale is converted into or sold or otherwise disposed
of for cash (other than interest received with respect to any such non-cash
consideration) or Cash Equivalents, then such conversion or disposition shall be
deemed to constitute an Asset Sale hereunder and the Net Cash Proceeds thereof
shall be applied in accordance with this covenant. The Company may defer the Net
Proceeds Offer until there is an aggregate unutilized Net Proceeds Offer Amount
equal to or in excess of $5,000,000 resulting from one or more Asset Sales or
deemed Asset Sales(at which time, the entire unutilized Net Proceeds Offer
Amount, and not just the amount in excess of $5,000,000, shall be applied as
required pursuant to this paragraph).
In the event of the transfer of substantially all (but not all) of the
property and assets of the Company and the Restricted Subsidiaries as an
entirety to a Person in a transaction permitted under "-- Merger, Consolidation
and Sale of Assets," the successor corporation shall be deemed to have sold the
properties and assets of the Company and the Restricted Subsidiaries not so
transferred for purposes of this covenant, and shall comply with the provisions
of this covenant with respect to such deemed sale as if it were an Asset Sale.
In addition, the fair market value (as determined in good faith by the Board of
Directors of the Company) of such properties and assets of the Company or the
Restricted Subsidiaries deemed to be sold shall be deemed to be Net Cash
Proceeds for purposes of this covenant.
Each Net Proceeds Offer will be mailed to the record Holders as shown on
the register of Holders within 30 days following the Net Proceeds Offer Trigger
Date, with a copy to the Trustee, and shall comply with the procedures set forth
in the Indenture. Upon receiving notice of the Net Proceeds Offer, Holders may
elect to tender their Exchange Notes in whole or in part in integral multiples
of $1,000 in exchange for cash. To the extent Holders properly tender Exchange
Notes in an amount exceeding the Net Proceeds Offer Amount, Exchange Notes of
tendering Holders will be purchased on a pro rata basis (based on amounts
tendered). A Net Proceeds Offer shall remain open for a period of 20 business
days or such longer period as may be required by law.
The Company will comply with the requirements of Rule 14e-1 under the
Exchange Act and any other securities laws and regulations thereunder to the
extent such laws and regulations are applicable in connection with the
repurchase of Notes pursuant to a Net Proceeds Offer. To the extent that the
provisions of any securities laws or regulations conflict with the "Asset Sale"
provisions of the Indenture, the Company shall comply with the applicable
securities laws and regulations and shall not be deemed to have breached its
obligations under the "Asset Sale" provisions of the Indenture by virtue
thereof.
Limitation on Dividend and Other Payment Restrictions Affecting
Subsidiaries. The Company will not, and will not cause or permit any of the
Restricted Subsidiaries to, directly or indirectly, create or otherwise cause or
permit to exist or become effective any encumbrance or restriction on the
ability of any Restricted Subsidiary to (a) pay dividends or make any other
distributions on or in respect of its Capital Stock; (b) make loans or advances
or to pay any Indebtedness or other obligation owed to the Company or any other
Restricted Subsidiary; or (c) transfer any of its property or assets to the
Company or any other Restricted Subsidiary, except for such encumbrances or
restrictions existing under or by reasons of: (1) applicable law; (2) the
Indenture; (3) customary non-assignment provisions of any contract or any lease
governing a leasehold interest of any Restricted Subsidiary; (4) any instrument
governing Acquired Indebtedness, which encum-
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brance or restriction is not applicable to any Person, or the properties or
assets of any Person, other than the Person or the properties or assets of the
Person so acquired; (5) agreements existing on the Issue Date to the extent and
in the manner such agreements are in effect on the Issue Date; (6) any other
agreement entered into after the Issue Date which contains encumbrances and
restrictions which are not materially more restrictive with respect to any
Restricted Subsidiary than those in effect with respect to such Restricted
Subsidiary pursuant to agreements as in effect on the Issue Date; (7) any
instrument governing Indebtedness of a Foreign Restricted Subsidiary; provided
that after giving effect to the imposition of such encumbrance or restriction,
the Company would be able to incur $1.00 of additional Indebtedness (other than
Permitted Indebtedness) in compliance with the covenant described under "--
Limitation on Incurrence of Additional Indebtedness"; (8) customary restrictions
on the transfer of any property or assets arising under a security agreement
governing a Lien permitted under the Indenture; (9) any agreement governing
Refinancing Indebtedness incurred to Refinance the Indebtedness issued, assumed
or incurred pursuant to an agreement referred to in clause (2), (4), (5) or (7)
above; provided, however, that the provisions relating to such encumbrance or
restriction contained in any such Refinancing Indebtedness are not materially
more restrictive than the provisions relating to such encumbrance or restriction
contained in agreements referred to in such clause (2), (4), (5) or (7); and
(10) any agreement governing the sale or disposition of any Restricted
Subsidiary which restricts dividends and distributions pending such sale or
disposition.
Limitation on Preferred Stock of Restricted Subsidiaries. The Company will
not permit any of the Restricted Subsidiaries to issue any Preferred Stock
(other than to the Company or to a Restricted Subsidiary) or permit any Person
(other than the Company or a Restricted Subsidiary) to own any Preferred Stock
of any Restricted Subsidiary.
Limitation on Liens. The Company will not, and will not cause or permit
any of the Restricted Subsidiaries to, directly or indirectly, create, incur,
assume or permit or suffer to exist any Liens of any kind against or upon any
property or assets of the Company or any of the Restricted Subsidiaries whether
owned on the Issue Date or acquired after the Issue Date, or any proceeds
therefrom, or assign or otherwise convey any right to receive income or profits
therefrom unless (i) in the case of Liens securing Indebtedness that is
expressly subordinate or junior in right of payment to the Notes, the Notes are
secured by a Lien on such property, assets or proceeds that is senior in
priority to such Liens and (ii) in all other cases, the Notes are equally and
ratably secured, except for (A) Liens existing as of the Issue Date to the
extent and in the manner such Liens are in effect on the Issue Date; (B) Liens
securing Senior Debt and Liens securing Guarantor Senior Debt; (C) Liens
securing the Notes and any Guarantees; (D) Liens in favor of the Company or a
Guarantor; (E) Liens securing Refinancing Indebtedness which is incurred to
Refinance any Indebtedness which Refinancing Indebtedness has been secured by a
Lien permitted under the Indenture and which has been incurred in accordance
with the provisions of the Indenture; provided, however, that such Liens do not
extend to or cover any property or assets of the Company or any of the
Restricted Subsidiaries not securing the Indebtedness so Refinanced; and (F)
Permitted Liens.
Prohibition on Incurrence of Senior Subordinated Debt. The Company will
not, and will not permit any Guarantor to, incur or suffer to exist Indebtedness
that is senior in right of payment to the Notes or the Guarantee of such
Guarantor and subordinate in right of payment to any other Indebtedness of the
Company or such Guarantor, as the case may be.
Merger, Consolidation and Sale of Assets. The Company will not, in a
single transaction or series of related transactions, consolidate or merge with
or into any Person, or sell, assign, transfer, lease, convey or otherwise
dispose of (or cause or permit any Restricted Subsidiary to sell, assign,
transfer, lease, convey or otherwise dispose of) all or substantially all of the
Company's assets (determined on a consolidated basis for the Company and the
Restricted Subsidiaries) whether as an entirety or substantially as an entirety
to any Person unless: (i) either (1) the Company shall be the surviving or
continuing corporation or (2) the Person (if other than the Company) formed by
such consolidation or into which the Company is merged or the Person which
acquires by sale, assignment, transfer, lease, conveyance or other disposition
the properties and assets of the Company and the Restricted Subsidiaries
substantially as an entirety (the "Surviving Entity") (x) shall be a corporation
organized and validly existing under the laws of the United States or any State
thereof or the District of Columbia and (y) shall expressly assume, by
supplemental indenture (in form and
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<PAGE> 50
substance satisfactory to the Trustee), executed and delivered to the Trustee,
the due and punctual payment of the principal of, and premium, if any, and
interest on all of the Notes and the performance of every covenant of the Notes,
the Indenture and the Registration Rights Agreement on the part of the Company
to be performed or observed; (ii) immediately after giving effect to such
transaction and the assumption contemplated by clause (i)(2)(y) above (including
giving effect to any Indebtedness and Acquired Indebtedness incurred or
anticipated to be incurred in connection with or in respect of such
transaction), the Company or such Surviving Entity, as the case may be, shall be
able to incur at least $1.00 of additional Indebtedness (other than Permitted
Indebtedness) pursuant to the covenant described under "-- Limitation on
Incurrence of Additional Indebtedness"; (iii) immediately before and immediately
after giving effect to such transaction and the assumption contemplated by
clause (i)(2)(y) above (including, without limitation, giving effect to any
Indebtedness and Acquired Indebtedness incurred or anticipated to be incurred
and any Lien granted in connection with or in respect of the transaction), no
Default or Event of Default shall have occurred or be continuing; and (iv) the
Company or the Surviving Entity shall have delivered to the Trustee an officers'
certificate and an opinion of counsel, each stating that such consolidation,
merger, sale, assignment, transfer, lease, conveyance or other disposition and,
if a supplemental indenture is required in connection with such transaction,
such supplemental indenture comply with the applicable provisions of the
Indenture and that all conditions precedent in the Indenture relating to such
transaction have been satisfied.
For purposes of the foregoing, the transfer (by lease, assignment, sale or
otherwise, in a single transaction or series of transactions) of all or
substantially all of the properties or assets of one or more Restricted
Subsidiaries the Capital Stock of which constitutes all or substantially all of
the properties and assets of the Company, shall be deemed to be the transfer of
all or substantially all of the properties and assets of the Company.
The Indenture will provide that upon any consolidation, combination or
merger or any transfer of all or substantially all of the assets of the Company
in accordance with the foregoing, in which the Company is not the continuing
corporation, the successor Person formed by such consolidation or into which the
Company is merged or to which such conveyance, lease or transfer is made shall
succeed to, and be substituted for, and may exercise every right and power of,
the Company under the Indenture and the Notes with the same effect as if such
surviving entity had been named as such.
No Guarantor (other than any Guarantor whose Guarantee is to be released in
accordance with the terms of the Guarantee and Indenture in connection with any
transaction complying with the provisions of the covenant described under
"-- Limitation on Asset Sales") will, and the Company will not cause or permit
any Guarantor to, consolidate with or merge with or into any Person other than
the Company or any other Guarantor unless: (i) the entity formed by or surviving
any such consolidation or merger (if other than the Guarantor) is a corporation
organized and existing under the laws of the United States or any State thereof
or the District of Columbia; (ii) such entity assumes by supplemental indenture
all of the obligations of the Guarantor under the Indenture, such Guarantor's
Guarantee and the Registration Rights Agreement; (iii) immediately after giving
effect to such transaction, no Default or Event of Default shall have occurred
and be continuing; (iv) immediately after giving effect to such transaction and
the use of any net proceeds therefrom on a pro forma basis, the Company could
satisfy the provisions of clause (ii) of the first paragraph of this covenant;
and (v) the Company shall have delivered to the Trustee an officers' certificate
and opinion of counsel, each stating that such consolidation or merger and, if a
supplemental indenture is required in connection with such transaction, such
supplemental indenture comply with the applicable provisions of the Indenture
and that all conditions precedent in the Indenture relating to such transaction
have been satisfied.
Limitations on Transactions with Affiliates. (a) The Company will not, and
will not permit any of the Restricted Subsidiaries to, directly or indirectly,
enter into or permit to exist any transaction or series of related transactions
(including, without limitation, the purchase, sale, lease or exchange of any
property or the rendering of any service) with, or for the benefit of, any of
its Affiliates (each an "Affiliate Transaction"), other than (x) Affiliate
Transactions permitted under paragraph (b) below and (y) Affiliate Transactions
on terms that are not materially less favorable than those that would have
reasonably been expected in a comparable transaction at such time on an
arm's-length basis from a Person that is not an Affiliate of the Company or such
Restricted Subsidiary. All Affiliate Transactions (and each series of related
Affiliate
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<PAGE> 51
Transactions which are similar or part of a common plan) involving aggregate
payments or other property with a fair market value in excess of $1.0 million
shall be approved by the Board of Directors of the Company or such Restricted
Subsidiary, as the case may be, such approval to be evidenced by a Board
Resolution stating that such Board of Directors has determined that such
transaction complies with the foregoing provisions. If the Company or any
Restricted Subsidiary enters into an Affiliate Transaction (or series of related
Affiliate Transactions related to a common plan) that involves an aggregate fair
market value of more than $10.0 million, the Company or such Restricted
Subsidiary, as the case may be, shall, prior to the consummation thereof, obtain
a favorable opinion as to the fairness of such transaction or series of related
transactions to the Company or the relevant Restricted Subsidiary, as the case
may be, from a financial point of view, from an Independent Financial Advisor
and file the same with the Trustee.
(b) The restrictions set forth in clause (a) shall not apply to (i)
employment, consulting and compensation arrangements and agreements of the
Company or any Restricted Subsidiary consistent with past practice or approved
by a majority of the disinterested members of the Board of Directors (or a
committee comprised of disinterested directors); (ii) reasonable fees and
compensation paid to and indemnity provided on behalf of, officers, directors,
employees, consultants or agents of the Company or any Restricted Subsidiary as
determined in good faith by the Company's Board of Directors or senior
management; (iii) consulting fees paid by the Company consistent with past
practice; (iv) transactions exclusively between or among the Company and any of
the Restricted Subsidiaries or exclusively between or among such Restricted
Subsidiaries, provided such transactions are not otherwise prohibited by the
Indenture; and (v) Restricted Payments or Permitted Investments permitted by the
Indenture.
Issuance of Subsidiary Guarantees. If (a) any Domestic Wholly Owned
Restricted Subsidiary incurs any Indebtedness (other than Indebtedness owing to
the Company or a Restricted Subsidiary) or (b) any Restricted Subsidiary
(including any Foreign Restricted Subsidiary) guarantees any Indebtedness (other
than Indebtedness owing to the Company or a Restricted Subsidiary) of the
Company or any of its Restricted Subsidiaries (other than a Subsidiary of such
Restricted Subsidiary) then, in either case, the Company shall cause such
Domestic Wholly Owned Restricted Subsidiary or such Restricted Subsidiary, as
the case may be, to (i) execute and deliver to the Trustee a supplemental
indenture in form reasonably satisfactory to the Trustee pursuant to which such
Domestic Wholly Owned Restricted Subsidiary or such Restricted Subsidiary, as
the case may be, shall unconditionally guarantee (each, a "Guarantee") all of
the Company's obligations under the Notes and the Indenture on the terms set
forth in the Indenture and (ii) deliver to the Trustee an opinion of counsel
(which may contain customary exceptions) that such supplemental indenture has
been duly authorized, executed and delivered by such Domestic Wholly Owned
Restricted Subsidiary or such Restricted Subsidiary, as the case may be, and
constitutes a legal, valid, binding and enforceable obligation of such Domestic
Wholly Owned Restricted Subsidiary or such Restricted Subsidiary, as the case
may be. Thereafter, such Domestic Wholly Owned Restricted Subsidiary or such
Restricted Subsidiary, as the case may be, shall be a Guarantor for all purposes
of the Indenture. The Company may cause any other Restricted Subsidiary of the
Company to issue a Guarantee and become a Guarantor.
Conduct of Business. The Company will not, and will not permit any
Restricted Subsidiary to, engage in any businesses which are not either: (i) the
same, similar or related to the businesses in which the Company or any of the
Restricted Subsidiaries are engaged on the Issue Date; (ii) Permitted
Investments; or (iii) businesses acquired through an acquisition after the Issue
Date which are not material to the Company and the Restricted Subsidiaries,
taken as a whole.
Payments for Consent. The Company will not, and will not cause or permit
any of its Subsidiaries to, directly or indirectly, pay or cause to be paid any
consideration, whether by way of interest, fee or otherwise, to any Holder of
any Notes for or as an inducement to any consent, waiver or amendment of any of
the terms or provisions of the Indenture, the Notes or the Guarantees unless
such consideration is offered to be paid to all Holders of the Notes who so
consent, waive or agree to amend in the time frame set forth in solicitation
documents relating to such consent, waiver or agreement.
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<PAGE> 52
Limitation on Designations of Unrestricted Subsidiaries. The Company may
designate any Subsidiary of the Company (other than a Subsidiary of the Company
which owns Capital Stock of a Restricted Subsidiary) as an "Unrestricted
Subsidiary" under the Indenture (a "Designation") only if:
(a) no Default shall have occurred and be continuing at the time of or
after giving effect to such Designation; and
(b) the Company would be permitted under the Indenture to make an
Investment at the time of Designation (assuming the effectiveness of such
Designation) in an amount (the "Designation Amount") equal to the sum of
(i) the fair market value of the Capital Stock of such Subsidiary owned by
the Company and/or any of the Restricted Subsidiaries on such date and (ii)
the aggregate amount of Indebtedness of such Subsidiary owed to the Company
and the Restricted Subsidiaries on such date; and
(c) the Company would be permitted to incur $1.00 of additional
Indebtedness (other than Permitted Indebtedness) pursuant to the covenant
described under "-- Limitation on Incurrence of Additional Indebtedness" at
the time of Designation (assuming the effectiveness of such Designation).
In the event of any such Designation, the Company shall be deemed to have
made an Investment constituting a Restricted Payment in the Designation Amount
pursuant to the covenant described under "-- Limitation on Restricted Payments"
for all purposes of the Indenture. The Indenture will further provide that the
Company shall not, and shall not permit any Restricted Subsidiary to, at any
time (x) provide direct or indirect credit support for or a guarantee of any
Indebtedness of any Unrestricted Subsidiary (including any undertaking agreement
or instrument evidencing such Indebtedness), (y) be directly or indirectly
liable for any Indebtedness of any Unrestricted Subsidiary or (z) be directly or
indirectly liable for any Indebtedness which provides that the holder thereof
may (upon notice, lapse of time or both) declare a default thereon or cause the
payment thereof to be accelerated or payable prior to its final scheduled
maturity upon the occurrence of a default with respect to any Indebtedness of
any Unrestricted Subsidiary (including any right to take enforcement action
against such Unrestricted Subsidiary), except, in the case of clause (x) or (y),
to the extent permitted under the covenant described under "-- Limitation on
Restricted Payments."
The Indenture further provides that the Company may revoke any Designation
of a Subsidiary as an Unrestricted Subsidiary ("Revocation"), whereupon such
Subsidiary shall then constitute a Restricted Subsidiary, if
(a) no Default shall have occurred and be continuing at the time and
after giving effect to such Revocation; and
(b) all Liens and Indebtedness of such Unrestricted Subsidiaries
outstanding immediately following such Revocation would, if incurred at
such time, have been permitted to be incurred for all purposes of the
Indenture.
All Designations and Revocations must be evidenced by an officers'
certificate of the Company delivered to the Trustee certifying compliance with
the foregoing provisions.
Reports to Holders. The Indenture provides that the Company will deliver
to the Trustee within 15 days after the filing of the same with the Commission,
copies of the quarterly and annual reports and of the information, documents and
other reports, if any, which the Company is required to file with the Commission
pursuant to Section 13 or 15(d) of the Exchange Act. The Indenture further
provides that, notwithstanding that the Company may not be subject to the
reporting requirements of Sections 13 or 15(d) of the Exchange Act, the Company
will file with the Commission, to the extent permitted, and provide the Trustee
and Holders with such annual and quarterly reports and such information,
documents and other reports specified in Section 13 and 15(d) of the Exchange
Act. The Company will also comply with the other provisions of TIA sec. 314(a).
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<PAGE> 53
EVENTS OF DEFAULT
The following events are defined in the Indenture as "Events of Default:"
(i) the failure to pay interest on any Notes when the same becomes due
and payable and the default continues for a period of 30 days (whether or
not such payment shall be prohibited by the subordination provisions of the
Indenture);
(ii) the failure to pay the principal on any Notes, when such
principal becomes due and payable, at maturity, upon redemption or
otherwise (including the failure to make a payment to purchase Notes
tendered pursuant to a Change of Control Offer or a Net Proceeds Offer)
(whether or not such payment shall be prohibited by the subordination
provision of the Indenture);
(iii) a default in the observance or performance of any other covenant
or agreement contained in the Indenture which default continues for a
period of 60 days after the Company receives written notice specifying the
default (and demanding that such default be remedied) from the Trustee or
the Holders of at least 25% of the outstanding principal amount of the
Notes (except in the case of a default with respect to the covenant
described under "-- Certain Covenants -- Merger, Consolidation and Sale of
Asset," which will constitute an Event of Default with such notice
requirement but without such passage of time requirement);
(iv) a default under any mortgage, indenture or instrument under which
there may be issued or by which there may be secured or evidenced any
Indebtedness of the Company or of any Restricted Subsidiary (or the payment
of which is guaranteed by the Company or any Restricted Subsidiary),
whether such Indebtedness now exists or is created after the Issue Date,
which default (a) is caused by a failure to pay principal of such
Indebtedness after any applicable grace period provided in such
Indebtedness on the date of such default (a "payment default") or (b)
results in the acceleration of such Indebtedness prior to its express
maturity (and such acceleration is not rescinded, or such Indebtedness is
not repaid, within 30 days) and, in each case, the principal amount of any
such Indebtedness, together with the principal amount of any other such
Indebtedness under which there has been a payment default or the maturity
of which has been so accelerated (and such acceleration is not rescinded,
or such Indebtedness is not repaid, within 30 days), aggregates $7.5
million;
(v) one or more judgments in an aggregate amount in excess of $7.5
million not covered by adequate insurance shall have been rendered against
the Company or any of the Restricted Subsidiaries and such judgments remain
undischarged, unpaid or unstayed for a period of 60 days after such
judgment or judgments become final and nonappealable;
(vi) certain events of bankruptcy affecting the Company or any of the
Significant Subsidiaries; or
(vii) any Guarantee ceases to be in full force and effect or any
Guarantee is declared to be null and void and unenforceable or any
Guarantee is found to be invalid or any of the Guarantors denies its
liability under its Guarantee (other than by reason of release of a
Guarantor in accordance with the terms of the Indenture).
If an Event of Default (other than an Event of Default specified in clause
(vi) above) shall occur and be continuing, the Trustee or the Holders of at
least 25% in principal amount of outstanding Notes may declare the principal of,
premium, if any, and accrued interest on all the Notes to be due and payable by
notice in writing to the Company and (if given by the Holders) the Trustee
specifying the respective Events of Default and that it is a "notice of
acceleration," and the same shall become immediately due and payable. If an
Event of Default specified in clause (vi) above occurs and is continuing, then
all unpaid principal of, premium, if any, and accrued and unpaid interest on all
of the outstanding Notes shall ipso facto become and be immediately due and
payable without any declaration or other act on the part of the Trustee or any
Holder.
The Indenture provides that, at any time after a declaration of
acceleration with respect to the Notes as described in the preceding paragraph,
the Holders of a majority in principal amount of the then outstanding Notes may
rescind and cancel such declaration and its consequences (i) if the rescission
would not conflict with any judgment or decree, (ii) if all existing Events of
Default have been cured or waived except
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nonpayment of principal or interest that has become due solely because of the
acceleration, (iii) to the extent the payment of such interest is lawful,
interest on overdue installments of interest and overdue principal, which has
become due otherwise than by such declaration of acceleration, has been paid,
(iv) if the Company has paid the Trustee its reasonable compensation and
reimbursed the Trustee for its expenses, disbursements and advances and (v) in
the event of the cure or waiver of an Event of Default of the type described in
clause (vi) of the description above of Events of Default, the Trustee shall
have received an officers' certificate and an opinion of counsel that such Event
of Default has been cured or waived. No such rescission shall affect any
subsequent Default or impair any right consequent thereto.
The Holders of a majority in principal amount of the then outstanding Notes
may waive any existing Default or Event of Default under the Indenture, and its
consequences, except a default in the payment of the principal of or interest on
any Notes.
Holders of the Notes may not enforce the Indenture or the Notes except as
provided in the Indenture and under the TIA. Subject to the provisions of the
Indenture relating to the duties of the Trustee, the Trustee is under no
obligation to exercise any of its rights or powers under the Indenture at the
request, order or direction of any of the Holders, unless such Holders have
offered to the Trustee reasonable indemnity. Subject to all provisions of the
Indenture and applicable law, the Holders of a majority in aggregate principal
amount of the then outstanding Notes have the right to direct the time, method
and place of conducting any proceeding for any remedy available to the Trustee
or exercising any trust or power conferred on the Trustee.
Under the Indenture, the Company is required to provide an officers'
certificate to the Trustee promptly upon the Company obtaining knowledge of any
Default or Event of Default (provided that the Company shall provide such
certification at least annually whether or not it knows of any Default or Event
of Default) that has occurred and, if applicable, describe such Default or Event
of Default and the status thereof.
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
The Company may, at its option and at any time, elect to have its
obligations and the obligations of any Guarantors discharged with respect to the
outstanding Notes ("Legal Defeasance"). Such Legal Defeasance means that the
Company shall be deemed to have paid and discharged the entire indebtedness
represented by the outstanding Notes, except for (i) the rights of Holders to
receive payments in respect of the principal of, premium, if any, and interest
on the Notes when such payments are due, (ii) the Company's obligations with
respect to the Notes concerning issuing temporary Notes, registration of Notes,
replacing mutilated, destroyed, lost or stolen Notes and the maintenance of an
office or agency for payments, (iii) the rights, powers, trust, duties and
immunities of the Trustee and the Company's obligations in connection therewith
and (iv) the Legal Defeasance provisions of the Indenture. In addition, the
Company may, at its option and at any time, elect to have the obligations of the
Company released with respect to certain covenants that are described in the
Indenture ("Covenant Defeasance") and thereafter any omission or failure to
comply with such obligations shall not constitute a Default or Event of Default
with respect to the Notes. In the event Covenant Defeasance occurs, certain
events (not including non-payment, bankruptcy, receivership, reorganization and
insolvency events) described under "-- Events of Default" will no longer
constitute an Event of Default with respect to the Notes.
In order to exercise Legal Defeasance or Covenant Defeasance, (i) the
Company must irrevocably deposit with the Trustee, in trust, for the benefit of
the Holders cash in U.S. dollars, non-callable U.S. government obligations, or a
combination thereof, in such amounts as will be sufficient, in the opinion of a
nationally recognized firm of independent public accountants, to pay the
principal of, premium, if any, and interest on the Notes on the stated date of
payment thereof or on the applicable redemption date, as the case may be; (ii)
in the case of Legal Defeasance, the Company shall have delivered to the Trustee
an opinion of counsel in the United States reasonably acceptable to the Trustee
confirming that (A) the Company has received from, or there has been published
by, the Internal Revenue Service a ruling or (B) since the date of the
Indenture, there has been a change in the applicable federal income tax law, in
either case to the effect that, and based thereon such opinion of counsel shall
confirm that, the Holders will not recognize income gain or loss for federal
income tax purposes as a result of such Legal Defeasance and will be subject to
federal
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income tax on the same amounts, in the same manner and at the same times as
would have been the case if such Legal Defeasance had not occurred; (iii) in the
case of Covenant Defeasance, the Company shall have delivered to the Trustee an
opinion of counsel in the United States reasonably acceptable to the Trustee
confirming that the Holders will not recognize income, gain or loss for federal
income tax purposes as a result of such Covenant Defeasance and will be subject
to federal income tax on the same amounts, in the same manner and at the same
times as would have been the case if such Covenant Defeasance had not occurred;
(iv) no Default or Event of Default shall have occurred and be continuing on the
date of such deposit or insofar as Events of Default from bankruptcy or
insolvency events are concerned, at any time in the period ending on the 91st
day after the date of deposit; (v) such Legal Defeasance or Covenant Defeasance
shall not result in a breach or violation of, or constitute a default under the
Indenture or any other material agreement or instrument to which the Company or
any of its Subsidiaries is a party or by which the Company or any of its
Subsidiaries is bound; (vi) the Company shall have delivered to the Trustee an
officers' certificate stating that the deposit was not made by the Company with
the intent of preferring the Holders over any other creditors of the Company or
with the intent of defeating, hindering, delaying or defrauding any other
creditors of the Company or others; (vii) the Company shall have delivered to
the Trustee an officers' certificate and an opinion of counsel, each stating
that all conditions precedent provided for or relating to the Legal Defeasance
or the Covenant Defeasance have been complied with; (viii) the Company shall
have delivered to the Trustee an opinion of counsel to the effect that (A) the
trust funds will not be subject to any rights of holders of Senior Debt,
including, without limitation, those arising under the Indenture and (B) after
the 91st day following the deposit, the trust funds will not be subject to the
effect of any applicable bankruptcy, insolvency, reorganization or similar laws
affecting creditors' rights generally; and (ix) certain other customary
conditions precedent are satisfied.
SATISFACTION AND DISCHARGE
The Indenture will be discharged and will cease to be of further effect
(except as to surviving rights or registration of transfer or exchange of the
Notes, as expressly provided for in the Indenture) as to all outstanding Notes
when (i) either (a) all the Notes theretofore authenticated and delivered
(except lost, stolen or destroyed Notes which have been replaced or paid and
Notes for whose payment money has theretofore been deposited in trust or
segregated and held in trust by the Company and thereafter repaid to the Company
or discharged from such trust) have been delivered to the Trustee for
cancellation or (b) all Notes not theretofore delivered to the Trustee for
cancellation have become due and payable and the Company has irrevocably
deposited or caused to be deposited with the Trustee funds in an amount
sufficient to pay and discharge the entire Indebtedness on the Notes not
theretofore delivered to the Trustee for cancellation, for principal of,
premium, if any, and interest on the Notes to the date of deposit together with
irrevocable instructions from the Company directing the Trustee to apply such
funds to the payment thereof at maturity or redemption, as the case may be; (ii)
the Company has paid all other sums payable under the Indenture by the Company;
and (iii) the Company has delivered to the Trustee an officers' certificate and
an opinion of counsel stating that all conditions precedent under the Indenture
relating to the satisfaction and discharge of the Indenture have been complied
with.
MODIFICATION OF THE INDENTURE
From time to time, the Company and the Trustee, without the consent of the
Holders, may amend the Indenture for certain specified purposes, including
curing ambiguities, defects or inconsistencies and other changes so long as such
change does not, in the opinion of the Trustee, adversely affect the rights of
any of the Holders in any material respect. In formulating its opinion on such
matters, the Trustee will be entitled to rely on such evidence as it deems
appropriate, including, without limitation, solely on an opinion of counsel.
Other modifications and amendments of the Indenture may be made with the consent
of the Holders of a majority in principal amount of the then outstanding Notes
issued under the Indenture, except that, without the consent of each Holder
affected thereby, no amendment may: (i) reduce the amount of Notes whose holders
must consent to an amendment; (ii) reduce the rate of or change or have the
effect of changing the time for payment of interest, including defaulted
interest, on any Notes; (iii) reduce the principal of or change or have the
effect of changing the fixed maturity of any Notes, or change the date on which
any Notes may be subject
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to redemption or repurchase, or reduce the redemption or repurchase price
therefor; (iv) make any Notes payable in money other than that stated in the
Notes; (v) make any change in provisions of the Indenture protecting the right
of each Holder to receive payment of principal of and interest on such Notes on
or after the stated due date thereof or to bring suit to enforce such payment,
or permitting Holders of a majority in principal amount of the then outstanding
Notes to waive Defaults or Events of Default; (vi) amend, change or modify in
any material respect the obligation of the Company to make and consummate a
Change of Control Offer after the occurrence of a Change of Control or make and
consummate a Net Proceeds Offer with respect to any Asset Sale that has been
consummated or modify any of the provisions or definitions with respect thereto;
(vii) modify or change any provision of the Indenture or the related definitions
affecting the subordination or ranking of the Notes or any Guarantee in a manner
which adversely affects the Holders; (viii) modify the provisions of "-- Certain
Covenants -- Payments for Consent" in any manner adverse to a Holder of Notes;
or (ix) release any Guarantor from any of its obligations under its Guarantee or
the Indenture otherwise than in accordance with the terms of the Indenture.
GOVERNING LAW
The Indenture provides that it, the Notes and any Guarantees will be
governed by, and construed in accordance with, the laws of the State of New York
but without giving effect to applicable principles of conflicts of law to the
extent that the application of the law of another jurisdiction would be required
thereby.
THE TRUSTEE
The Indenture provides that, except during the continuance of an Event of
Default, the Trustee will perform only such duties as are specifically set forth
in the Indenture. During the existence of an Event of Default, the Trustee will
exercise such rights and powers vested in it by the Indenture, and use the same
degree of care and skill in its exercise as a prudent man would exercise or use
under the circumstances in the conduct of his own affairs.
The Indenture and the provisions of the TIA contain certain limitations on
the rights of the Trustee, should it become a creditor of the Company, to obtain
payments of claims in certain cases or to realize on certain property received
in respect of any such claim as security or otherwise. Subject to the TIA, the
Trustee will be permitted to engage in other transactions; provided that if the
Trustee acquires any conflicting interest as described in the TIA, it must
eliminate such conflict or resign.
CERTAIN DEFINITIONS
Set forth below is a summary of certain of the defined terms used in the
Indenture. Reference is made to the Indenture for the full definition of all
such terms, as well as any other terms used herein for which no definition is
provided.
"Acquired Indebtedness" means Indebtedness of a Person or any of its
Subsidiaries existing at the time such Person becomes a Restricted Subsidiary or
at the time it merges or consolidates with the Company or any of the Restricted
Subsidiaries or assumed by the Company or any Restricted Subsidiary in
connection with the acquisition of assets from such Person and in each case not
incurred by such Person in connection with, or in anticipation or contemplation
of, such Person becoming a Restricted Subsidiary or such acquisition, merger or
consolidation.
"Affiliate" means, with respect to any specified Person, any other Person
who directly or indirectly through one or more intermediaries controls, or is
controlled by, or is under common control with, such specified Person. The term
"control" means the possession, directly or indirectly, of the power to direct
or cause the direction of the management and policies of a Person, whether
through the ownership of voting securities, by contract or otherwise; and the
terms "controlling" and "controlled" have meanings correlative of the foregoing.
"Affiliate Transaction" has the meaning set forth under "-- Certain
Covenants -- Limitation on Transactions with Affiliates."
"Asset Acquisition" means (a) an Investment by the Company or any
Restricted Subsidiary in any other Person pursuant to which such Person shall
become a Restricted Subsidiary, or shall be merged with or into
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the Company or any Restricted Subsidiary, or (b) the acquisition by the Company
or any Restricted Subsidiary of the assets of any Person (other than a
Restricted Subsidiary) which constitute all or substantially all of the assets
of such Person or comprises any division or line of business of such Person or
any other properties or assets of such Person other than in the ordinary course
of business.
"Asset Sale" means any direct or indirect sale, issuance, conveyance, lease
(other than operating leases entered into in the ordinary course of business),
assignment or other transfer (other than the granting of a Lien in accordance
with the Indenture) for value by the Company or any of the Restricted
Subsidiaries (including any Sale and Leaseback Transaction) to any Person other
than the Company or a Restricted Subsidiary of (a) any Capital Stock of any
Restricted Subsidiary; or (b) any other property or assets of the Company or any
Restricted Subsidiary other than in the ordinary course of business; provided,
however, that Asset Sales shall not include (i) a transaction or series of
related transactions for which the Company or the Restricted Subsidiaries
receive aggregate consideration of less than $1.0 million, (ii) the sale, lease,
conveyance, disposition or other transfer of all or substantially all of the
assets of the Company as permitted by the covenant described under "-- Certain
Covenants -- Merger, Consolidation and Sale of Assets," or (iii) any Restricted
Payment made in accordance with the covenant described under "-- Certain
Covenants -- Limitation on Restricted Payments."
"Blockage Period" has the meaning set forth under "-- Subordination."
"Board of Directors" means, as to any Person, the board of directors of
such Person or any duly authorized committee thereof.
"Board Resolution" means, with respect to any Person, a copy of a
resolution certified by the Secretary or an Assistant Secretary of such Person
to have been duly adopted by the Board of Directors of such Person and to be in
full force and effect on the date of such certification, and delivered to the
Trustee.
"Capitalized Lease Obligation" means, as to any Person, the obligations of
such Person under a lease that are required to be classified and accounted for
as capital lease obligations under GAAP and, for purposes of this definition,
the amount of such obligations at any date shall be the capitalized amount of
such obligations at such date, determined in accordance with GAAP.
"Capital Stock" means (i) with respect to any Person that is a corporation,
any and all shares, interests, participations or other equivalents (however
designated and whether or not voting) of corporate stock, including each class
of Common Stock and Preferred Stock of such Person and (ii) with respect to any
Person that is not a corporation, any and all partnership or other equity
interests of such Person.
"Cash Equivalents" means (i) marketable direct obligations issued by, or
unconditionally guaranteed by, the United States Government or issued by any
agency thereof and backed by the full faith and credit of the United States, in
each case maturing within one year from the date of acquisition thereof; (ii)
marketable direct obligations issued by any state of the United States of
America or any political subdivision of any such state or any public
instrumentality thereof maturing within one year from the date of acquisition
thereof and, at the time of acquisition, having one of the two highest ratings
obtainable from either Standard & Poor's Corporation ("S&P") or Moody's
Investors Service, Inc. ("Moody's"); (iii) commercial paper maturing no more
than one year from the date of creation thereof and, at the time of acquisition,
having a rating of at least A-1 from S&P or at least P-1 from Moody's; (iv)
certificates of deposit or bankers' acceptances maturing within one year from
the date of acquisition thereof issued by any bank organized under the laws of
the United States of America or any state thereof or the District of Columbia or
any U.S. branch of a foreign bank having at the date of acquisition thereof
combined capital and surplus of not less than $250,000,000; (v) repurchase
obligations with a term of not more than seven days for underlying securities of
the types described in clause (i) above entered into with any bank meeting the
qualifications specified in clause (iv) above; and (vi) investments in money
market funds which invest substantially all their assets in securities of the
types described in clauses (i) through (v) above.
"Change of Control" means the occurrence of one or more of the following
events: (i) any sale, lease, exchange or other transfer (in one transaction or a
series of related transactions) of all or substantially all of the assets of the
Company to any Person or group of related Persons for purposes of Section 13(d)
of the Exchange Act (a "Group"), together with any Affiliates thereof (whether
or not otherwise in compliance with
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the provisions of the Indenture); (ii) the approval by the holders of Capital
Stock of the Company of any plan or proposal for the liquidation or dissolution
of the Company (whether or not otherwise in compliance with the provisions of
the Indenture); or (iii) any Person or Group (other than the Permitted
Holder(s)) shall become the beneficial owner, directly or indirectly, of shares
representing more than 50% of the aggregate ordinary voting power represented by
the issued and outstanding Capital Stock of the Company.
"Change of Control Offer" has the meaning set forth under "-- Change of
Control."
"Change of Control Payment Date" has the meaning set forth under "-- Change
of Control."
"Commission" means the Securities and Exchange Commission, as from time to
time constituted, or if at any time after the execution of the Indenture such
Commission is not existing and performing the applicable duties now assigned to
it, then the body or bodies performing such duties at such time.
"Common Stock" of any Person means any and all shares, interests or other
participations in, and other equivalents (however designated and whether voting
or non-voting) of such Person's common stock, whether outstanding on the Issue
Date or issued after the Issue Date, and includes, without limitation, all
series and classes of such common stock.
"Consolidated EBITDA" means, with respect to the Company, for any period,
the sum (without duplication) of (i) Consolidated Net Income and (ii) to the
extent Consolidated Net Income has been reduced thereby, (A) all income taxes of
the Company and the Restricted Subsidiaries paid or accrued in accordance with
GAAP for such period (other than income taxes attributable to extraordinary or
nonrecurring gains or taxes attributable to Asset Sales outside the ordinary
course of business), (B) Consolidated Interest Expense and (C) Consolidated
Non-cash Charges, less any non-cash items increasing Consolidated Net Income for
such period, all as determined on a consolidated basis for the Company and the
Restricted Subsidiaries in accordance with GAAP.
"Consolidated Fixed Charge Coverage Ratio" means, with respect to the
Company, the ratio of Consolidated EBITDA of the Company during the four full
fiscal quarters (the "Four Quarter Period") ending on or prior to the date of
the transaction giving rise to the need to calculate the Consolidated Fixed
Charge Coverage Ratio (the "Transaction Date") to Consolidated Fixed Charges of
the Company for the Four Quarter Period. In addition to and without limitation
of the foregoing, for purposes of this definition, "Consolidated EBITDA" and
"Consolidated Fixed Charges" shall be calculated after giving effect on a pro
forma basis for the period of such calculation to (i) the incurrence or
repayment of any Indebtedness of the Company or any of the Restricted
Subsidiaries (and the application of the proceeds thereof) giving rise to the
need to make such calculation and any incurrence or repayment of other
Indebtedness (and the application of the proceeds thereof), other than the
incurrence or repayment of Indebtedness in the ordinary course of business for
working capital purposes pursuant to working capital facilities, occurring
during the Four Quarter Period or at any time subsequent to the last day of the
Four Quarter Period and on or prior to the Transaction Date, as if such
incurrence or repayment, as the case may be (and the application of the proceeds
thereof), occurred on the first day of the Four Quarter period and (ii) any
Asset Sales or other dispositions or Asset Acquisitions (including, without
limitation, any Asset Acquisition giving rise to the need to make such
calculation as a result of the Company or one of the Restricted Subsidiaries
(including any person who becomes a Restricted Subsidiary as a result of the
Asset Acquisition) incurring, assuming or otherwise being liable for Acquired
Indebtedness and also including any Consolidated EBITDA (provided that such
Consolidated EBITDA shall be included only to the extent includable pursuant to
the definition of "Consolidated Net Income" attributable to the assets which are
the subject of the Asset Acquisition or Asset Sale or other disposition during
the Four Quarter Period) occurring during the Four Quarter Period or at any time
subsequent to the last day of the Four Quarter Period and on or prior to the
Transaction Date as if such Asset Sale or Asset Acquisition or other disposition
(including the incurrence, assumption or liability for any such Acquired
Indebtedness) occurred on the first day of the Four Quarter Period. If the
Company or any of the Restricted Subsidiaries directly or indirectly guarantees
Indebtedness of a third Person, the preceding sentence shall give effect to the
incurrence of such guaranteed Indebtedness as if the Company or any Restricted
Subsidiary had directly incurred or otherwise assumed such guaranteed
Indebtedness. Furthermore, in calculating "Consolidated Fixed Charges" for
purposes of determining the denominator (but not the
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numerator) of this "Consolidated Fixed Charge Coverage Ratio," (1) interest on
outstanding Indebtedness determined on a fluctuating basis as of the Transaction
Date and which will continue to be so determined thereafter shall be deemed to
have accrued at a fixed rate per annum equal to the rate of interest on such
Indebtedness in effect on the Transaction Date; (2) if interest on any
Indebtedness actually incurred on the Transaction Date may optionally be
determined at an interest rate based upon a factor of a prime or similar rate, a
eurocurrency interbank offered rate, or other rates, then the interest rate in
effect on the Transaction Date will be deemed to have been in effect during the
Four Quarter Period; and (3) notwithstanding clause (1) above, interest on
Indebtedness determined on a fluctuating basis, to the extent such interest is
covered by agreements relating to Interest Swap Obligations, shall be deemed to
accrue at the rate per annum resulting after giving effect to the operation of
such agreements.
"Consolidated Fixed Charges" means, with respect to the Company for any
period, the sum, without duplication, of (i) Consolidated Interest Expense, plus
(ii) the product of (x) the amount of all dividend payments on any series of
Preferred Stock of the Company (other than dividends paid in Qualified Capital
Stock) paid, accrued or scheduled to be paid or accrued during such period times
(y) a fraction, the numerator of which is one and the denominator of which is
one minus the then current effective consolidated federal, state and local
income tax rate of the Company, expressed as a decimal.
"Consolidated Interest Expense" means, with respect to the Company for any
period, the sum of, without duplication: (i) the aggregate of the interest
expense of the Company and the Restricted Subsidiaries for such period
determined on a consolidated basis in accordance with GAAP, including without
limitation, (a) any amortization of debt discount, (b) the net costs under
Interest Swap Obligations, (c) all capitalized interest and (d) the interest
portion of any deferred payment obligation; and (ii) the interest component of
Capitalized Lease Obligations paid, accrued and/or scheduled to be paid or
accrued by the Company and the Restricted Subsidiaries during such period as
determined on a consolidated basis in accordance with GAAP.
"Consolidated Net Income" means, with respect to the Company, for any
period, the aggregate net income (or loss) of the Company and the Restricted
Subsidiaries for such period on a consolidated basis, determined in accordance
with GAAP; provided that there shall be excluded therefrom (a) after-tax gains
and losses from Asset Sales or abandonments or reserves relating thereto, (b)
extraordinary or nonrecurring gains or losses, (c) the net income of any Person
acquired in a "pooling of interests" transaction accrued prior to the date it
becomes a Restricted Subsidiary or is merged or consolidated with the Company or
any Restricted Subsidiary, (d) the net income (but not loss) of any Restricted
Subsidiary to the extent that the declaration of dividends or similar
distributions by that Restricted Subsidiary of that income is restricted by a
contract, operation of law or otherwise, (e) the net income of any Person, other
than a Restricted Subsidiary, except to the extent of cash dividends or
distributions paid to the Company or to a Restricted Subsidiary by such Person,
(f) any restoration to income of any contingency reserve, except to the extent
that provision for such reserve was made out of Consolidated Net Income accrued
at any time following the Issue Date or any such restorations which do not
exceed $500,000 in the aggregate in any four fiscal quarter period, (g) income
or loss attributable to discontinued operations (including, without limitation,
operations disposed of during such period whether or not such operations were
classified as discontinued) and (h) in the case of a successor to the Company by
consolidation or merger or as a transferee of the Company's assets, any earnings
of the successor corporation prior to such consolidation, merger or transfer of
assets.
"Consolidated Non-cash Charges" means, with respect to the Company, for any
period, the aggregate depreciation, amortization and other non-cash expenses of
the Company and the Restricted Subsidiaries reducing Consolidated Net Income of
the Company for such period, determined on a consolidated basis in accordance
with GAAP (excluding any such charge which requires an accrual of or a reserve
for cash charges for any future period).
"Covenant Defeasance" has the meaning set forth under "-- Legal Defeasance
and Covenant Defeasance."
"Credit Agreement" means the Credit Agreement dated as of the Issue Date,
among the Company, the Guarantors, the lenders party thereto in their capacities
as lenders thereunder and First Union National Bank, as agent, together with the
related documents thereto (including, without limitation, any guarantee agree-
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ments and security documents), in each case as such agreements may be amended
(including any amendment and restatement thereof), supplemented or otherwise
modified from time to time, including any agreement extending the maturity of,
refinancing, replacing or otherwise restructuring (including increasing the
amount of available borrowings thereunder (provided that such increase in
borrowings is permitted by the covenant described under "-- Certain
Covenants -- Limitation on Incurrence of Additional Indebtedness" (including the
definition of Permitted Indebtedness)) or adding Restricted Subsidiaries as
additional borrowers or guarantors thereunder) all or any portion of the
Indebtedness under such agreement or any successor or replacement agreement and
whether by the same or any other agent, lender or group of lenders.
"Currency Agreement" means any foreign exchange contract, currency swap
agreement or other similar agreement or arrangement designed to protect the
Company or any Restricted Subsidiary against fluctuations in currency values.
"Default" means an event or condition the occurrence of which is, or with
the lapse of time or the giving of notice or both would be, an Event of Default.
"Default Notice" has the meaning set forth under "-- Subordination."
"Designated Senior Debt" means (i) Indebtedness under or in respect of the
Credit Agreement and (ii) any other Indebtedness constituting Senior Debt which,
at the time of determination, has an aggregate principal amount of at least
$10,000,000 and is specifically designated in the instrument evidencing such
Senior Debt as "Designated Senior Debt" by the Company.
"Designation" has the meaning set forth under "-- Certain
Covenants -- Limitation on Designations of Unrestricted Subsidiaries."
"Designation Amount" has the meaning set forth under "-- Certain
Covenants -- Limitation on Designations of Unrestricted Subsidiaries."
"Disqualified Capital Stock" means that portion of any Capital Stock which,
by its terms (or by the terms of any security into which it is convertible or
for which it is exchangeable), or upon the happening of any event, matures or is
mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or
is mandatorily exchangeable for Indebtedness, or is redeemable, or is
exchangeable for Indebtedness, at the sole option of the holder thereof on or
prior to the final maturity date of the Notes.
"Domestic Wholly Owned Restricted Subsidiary" means a Wholly Owned
Restricted Subsidiary incorporated or otherwise organized or existing under the
laws of the United States, any state thereof or any territory or possession of
the United States.
"Exchange Act" means the Securities Exchange Act of 1934, as amended, or
any successor statute or statutes thereto, and the rules and regulations of the
Commission promulgated thereunder.
"Fair market value" means, with respect to any asset or property, the price
which could be negotiated in an arm's-length, free market transaction, for cash,
between a willing seller and a willing and able buyer, neither of whom is under
undue pressure or compulsion to complete the transaction. Fair market value
shall be determined by the Board of Directors of the Company acting reasonably
and in good faith and shall be evidenced by a Board Resolution of the Board of
Directors of the Company delivered to the Trustee.
"Foreign Restricted Subsidiary" means any Restricted Subsidiary that is
organized and existing under the laws of a jurisdiction other than the United
States, any State thereof, the District of Columbia or any territory or
possession of the United States.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as may be approved by a significant segment of the accounting
profession of the United States, which are in effect as of the Issue Date.
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"Guarantee" has the meaning set forth under "-- Certain
Covenants -- Issuance of Subsidiary Guarantees."
"Guarantor" means (i) each Domestic Wholly Owned Restricted Subsidiary of
the Company as of the Issue Date and (ii) each other Person that in the future
executes a Guarantee pursuant to the covenant described under "-- Certain
Covenants -- Issuance of Subsidiary Guarantees" or otherwise; provided that any
Person constituting a Guarantor as described above shall cease to constitute a
Guarantor when its Guarantee is released in accordance with the terms of the
Indenture.
"Guarantor Senior Debt" means, with respect to any Guarantor, (i) the
principal of, premium, if any, and interest (including any interest accruing
subsequent to the filing of a petition of bankruptcy at the rate provided for in
the documentation with respect thereto, whether or not such interest is an
allowed claim under applicable law) on any Indebtedness of such Guarantor,
whether outstanding on the Issue Date or thereafter created, incurred or
assumed, unless, in the case of any particular Indebtedness, the instrument
creating or evidencing the same or pursuant to which the same is outstanding
expressly provides that such Indebtedness shall not be senior in right of
payment to the Guarantee of such Guarantor. Without limiting the generality of
the foregoing, "Guarantor Senior Debt" shall also include the principal of,
premium, if any, interest (including any interest accruing subsequent to the
filing of a petition of bankruptcy at the rate provided for in the documentation
with respect thereto, whether or not such interest is an allowed claim under
applicable law) on, and all other amounts owing in respect of, (x) all monetary
obligations of every nature of the Company or any Guarantor with respect to the
Credit Agreement, including, without limitation, obligations to pay principal
and interest, reimbursement obligations under letters of credit, fees, expenses
and indemnities, (y) all Interest Swap Obligations and (z) all obligations under
Currency Agreements, in each case whether outstanding on the Issue Date or
thereafter incurred. Notwithstanding the foregoing, "Guarantor Senior Debt"
shall not include (i) any Indebtedness of such Guarantor owing to a Subsidiary
of such Guarantor or any Affiliate of such Guarantor or any of such Affiliate's
Subsidiaries, (ii) Indebtedness to, or guaranteed on behalf of, any shareholder,
director, officer or employee of such Guarantor or any Subsidiary of such
Guarantor (including, without limitation, amounts owed for compensation), (iii)
Indebtedness to trade creditors and other amounts incurred in connection with
obtaining goods, materials or services, (iv) Indebtedness represented by
Disqualified Capital Stock, (v) any liability for federal, state, local or other
taxes owed or owing by such Guarantor, (vi) Indebtedness incurred in violation
of the covenant described under "-- Certain Covenants -- Limitation on
Incurrence of Additional Indebtedness," (vii) Indebtedness which, when incurred
and without respect to any election under Section 1111(b) of Title 11, United
States Code, is without recourse to such Guarantor and (viii) any Indebtedness
which is, by its express terms, subordinated in right of payment to any other
Indebtedness of such Guarantor.
"incur" has the meaning set forth under "-- Certain Covenants -- Limitation
on Incurrence on Additional Indebtedness."
"Indebtedness" means, with respect to any Person, without duplication, (i)
all Obligations of such Person for borrowed money, (ii) all Obligations of such
Person evidenced by bonds, debentures, notes or other similar instruments, (iii)
all Capitalized Lease Obligations of such Person, (iv) all Obligations of such
Person issued or assumed as the deferred purchase price of property, all
conditional sale obligations and all Obligations under any title retention
agreement (but excluding trade accounts payable and other accrued liabilities
arising in the ordinary course of business that are not overdue by 90 days or
more or are being contested in good faith by appropriate proceedings promptly
instituted and diligently conducted), (v) all Obligations for the reimbursement
of any obligor on any letter of credit, banker's acceptance or similar credit
transaction, (vi) guarantees and other contingent obligations in respect of
Indebtedness of any other Person referred to in clauses (i) through (v) above
and clause (viii) below, (vii) all Obligations of any other Person of the type
referred to in clauses (i) through (vi) which are secured by any Lien on any
property or asset of such Person, the amount of such Obligation being deemed to
be the lesser of the fair market value of such property or asset or the amount
of the Obligation so secured, (viii) all Obligations under currency agreements
and interest swap agreements of such Person and (ix) all Disqualified Capital
Stock issued by such Person with the amount of Indebtedness represented by such
Disqualified Capital Stock being equal to the greater of its voluntary or
involuntary liquidation preference and its maximum fixed repurchase price, but
excluding accrued dividends, if
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any. For purposes hereof, the "maximum fixed repurchase price" of any
Disqualified Capital Stock which does not have a fixed repurchase price shall be
calculated in accordance with the terms of such Disqualified Capital Stock as if
such Disqualified Capital Stock were purchased on any date on which Indebtedness
shall be required to be determined pursuant to the Indenture, and if such price
is based upon, or measured by, the fair market value of such Disqualified
Capital Stock, such fair market value shall be determined reasonably and in good
faith by the Board of Directors of the issuer of such Disqualified Capital
Stock.
"Independent Financial Advisor" means a firm (i) which does not, and whose
directors, officers and employees and Affiliates do not, have a direct or
indirect financial interest in the Company and (ii) which, in the judgment of
the Board of Directors of the Company, is otherwise independent and qualified to
perform the task for which it is to be engaged.
"Initial Purchasers" means Salomon Brothers Inc, First Union Capital
Markets and Schroder & Co. Inc.
"Interest Swap Obligations" means the obligations of any Person pursuant to
any arrangement with any other Person, whereby, directly or indirectly, such
Person is entitled to receive from time to time periodic payments calculated by
applying either a floating or a fixed rate of interest on a stated notional
amount in exchange for periodic payments made by such other Person calculated by
applying a fixed or a floating rate of interest on the same notional amount and
shall include, without limitation, interest rate swaps, caps, floors, collars
and similar agreements.
"Investment" means, with respect to any Person, (i) any direct or indirect
loan or other extension of credit (including, without limitation, a guarantee)
or capital contribution to (by means of any transfer of cash or other property
to others or any payment for property or services for the account or use of
others), or (ii) any purchase or acquisition by such Person of any Capital
Stock, bonds, notes, debentures or other securities or evidences of Indebtedness
issued by, any Person. "Investment" shall exclude extensions of trade credit by
the Company and the Restricted Subsidiaries on commercially reasonable terms in
accordance with normal trade practices of the Company or such Restricted
Subsidiary, as the case may be. If the Company or any Restricted Subsidiary
sells or otherwise disposes of any Capital Stock of any Restricted Subsidiary
(the "Referent Subsidiary") such that, after giving effect to any such sale or
disposition the Referent Subsidiary shall cease to be a Restricted Subsidiary,
the Company shall be deemed to have made an Investment on the date of any such
sale or disposition equal to the fair market value of the Capital Stock of the
Referent Subsidiary not sold or disposed of.
"Issue Date" means the date of original issuance of the Notes.
"Legal Defeasance" has the meaning set forth under "-- Legal Defeasance and
Covenant Defeasance."
"Lien" means any lien, mortgage, deed of trust, pledge, security interest,
charge or encumbrance of any kind (including any conditional sale or other title
retention agreement, any lease in the nature thereof and any agreement to give
any security interest).
"Net Cash Proceeds" means, with respect to any Asset Sale, the proceeds in
the form of cash or Cash Equivalents, including payments in respect of deferred
payment obligations when received in the form of cash or Cash Equivalents (other
than the portion of any such deferred payment constituting interest), received
by the Company or any of the Restricted Subsidiaries from such Asset Sale net of
(a) reasonable out-of-pocket expenses and fees relating to such Asset Sale
(including, without limitation, legal, accounting and investment banking fees,
sales commissions and relocation expenses), (b) taxes paid or payable after
taking into account any reduction in consolidated tax liability due to available
tax credits or deductions and any tax sharing arrangements, (c) repayments of
Indebtedness secured by the property or assets subject to such Asset Sale that
is required to be repaid in connection with such Asset Sale and (d) appropriate
amounts determined by the Company or any Restricted Subsidiary, as the case may
be, as a reserve, in accordance with GAAP, against any liabilities associated
with such Asset Sale and retained by the Company or any Restricted Subsidiary,
as the case may be, after such Asset Sale, including, without limitation,
pension and other post-employment benefit liabilities, liabilities related to
environmental matters and liabilities under any indemnification obligations
associated with such Asset Sale.
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"Net Proceeds Offer" has the meaning set forth under "-- Certain
Covenants -- Limitation on Asset Sales."
"Net Proceeds Offer Amount" has the meaning set forth under "-- Certain
Covenants -- Limitation on Asset Sales."
"Net Proceeds Offer Payment Date" had the meaning set forth under
"-- Certain Covenants -- Limitation on Asset Sales."
"Net Proceeds Offer Trigger Date" has the meaning set forth under
"-- Certain Covenants -- Limitation on Asset Sales."
"Obligations" means all obligations for principal, premium, interest,
penalties, fees, indemnifications, reimbursements, damages and other liabilities
payable under the documentation governing any Indebtedness.
"Permitted Holders" means (i) Fleet Venture Resources, Inc., Fleet Equity
Partners VI-B, L.P., Chisholm Partners III, L.P., Kennedy Plaza Partners, Habib
Y. Gorgi, Bernard V. Buonanno III, Ross B. George and Joseph L. Sylvia and (ii)
any Person "controlled" (as defined in the definition of "Affiliate") by one or
more of the Persons identified in clause (i) of this definition.
"Permitted Indebtedness" means, without duplication, each of the following:
(i) Indebtedness under the Notes, the Indenture and any Guarantees not
to exceed $100,000,000 in aggregate principal amount;
(ii) Indebtedness incurred pursuant to the Credit Agreement in an
aggregate principal amount at any time outstanding not to exceed the
greater of (x) $30.0 million and (y) the sum of (A) 85% of the net book
value of the accounts receivable of the Company and the Restricted
Subsidiaries and (B) 50% of the net book value of the inventory of the
Company and the Restricted Subsidiaries less (C) the amount of Indebtedness
outstanding pursuant to clause (xiii) of this definition reduced in the
case of (x) by any required permanent repayments with the proceeds of Asset
Sales (which are accompanied by a corresponding permanent commitment
reduction) thereunder;
(iii) other Indebtedness of the Company and the Restricted
Subsidiaries outstanding on the Issue Date reduced by the amount of any
scheduled amortization payments or mandatory prepayments when actually paid
or permanent reductions thereon;
(iv) Interest Swap Obligations of the Company covering Indebtedness of
the Company or any Guarantor and Interest Swap Obligations of any
Restricted Subsidiary covering Indebtedness of such Restricted Subsidiary;
provided, however, that such Interest Swap Obligations are entered into to
protect the Company and the Restricted Subsidiaries from fluctuations in
interest rates on Indebtedness incurred in accordance with the Indenture to
the extent the notional principal amount of such Interest Swap Obligations
does not exceed the principal amount of the Indebtedness to which such
Interest Swap Obligations relates;
(v) Indebtedness under Currency Agreements; provided that in the case
of Currency Agreements which relate to Indebtedness, such Currency
Agreements do not increase the Indebtedness of the Company and the
Restricted Subsidiaries outstanding other than as a result of fluctuations
in foreign currency exchange rates or by reason of fees, indemnities and
compensation payable thereunder;
(vi) Indebtedness of a Restricted Subsidiary to the Company or another
Restricted Subsidiary for so long as such Indebtedness is held by the
Company or a Restricted Subsidiary, in each case subject to no Lien held by
a Person other than the Company or a Restricted Subsidiary; provided that
if as of any date any Person other than the Company or a Restricted
Subsidiary owns or holds any such Indebtedness or holds a Lien in respect
of such Indebtedness, such date shall be deemed the incurrence of
Indebtedness not constituting Permitted Indebtedness by the issuer of such
Indebtedness;
(vii) Indebtedness of the Company to a Restricted Subsidiary for so
long as such Indebtedness is held by a Restricted Subsidiary, in each case
subject to no Lien; provided that (a) any Indebtedness of
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the Company to any Restricted Subsidiary is unsecured and (b) if as of any
date any Person other than a Restricted Subsidiary owns or holds any such
Indebtedness or any Person holds a Lien in respect of such Indebtedness,
such date shall be deemed the incurrence of Indebtedness not constituting
Permitted Indebtedness by the Company;
(viii) Indebtedness arising from the honoring by a bank or other
financial institution of a check, draft or similar instrument inadvertently
(except in the case of daylight overdrafts) drawn against insufficient
funds in the ordinary course of business; provided, however, that such
Indebtedness is extinguished within five business days of incurrence;
(ix) Indebtedness of the Company or any of the Restricted Subsidiaries
represented by letters of credit for the account of the Company or such
Restricted Subsidiary, as the case may be, in order to provide security for
workers' compensation claims, payment obligations in connection with
self-insurance or similar requirements in the ordinary course of business;
(x) Refinancing Indebtedness;
(xi) additional Indebtedness of the Company and the Guarantors in an
aggregate principal amount not to exceed $10.0 million at any one time
outstanding;
(xii) Purchase Money Indebtedness and Capitalized Lease Obligations
(and any Indebtedness incurred to Refinance such Purchase Money
Indebtedness or Capitalized Lease Obligations) not to exceed $10.0 million
at any one time outstanding; and
(xiii) Indebtedness of Foreign Restricted Subsidiaries that are not
Guarantors in an aggregate principal amount at any one time outstanding not
to exceed the greater of (a) $25.0 million or (b) the sum of (x) 85% of the
net book value of accounts receivable of the Foreign Restricted
Subsidiaries that are not Guarantors and (y) 50% of the net book value of
the inventory of the Foreign Restricted Subsidiaries that are not
Guarantors.
"Permitted Investments" means (i) Investments by the Company or any
Restricted Subsidiary in any Person that is or will become immediately after
such Investment a Restricted Subsidiary or that will merge or consolidate into
the Company or a Restricted Subsidiary; (ii) investments in the Company by any
Restricted Subsidiary; provided that any Indebtedness evidencing such Investment
is unsecured; (iii) investments in cash and Cash Equivalents; (iv) loans and
advances to employees, officers and directors of the Company and the Restricted
Subsidiaries in the ordinary course of business for bona fide business purposes
not in excess of $1.0 million at any time outstanding; (v) Currency Agreements
and Interest Swap Obligations entered into in the ordinary course of the
Company's or a Restricted Subsidiary's businesses and otherwise in compliance
with the Indenture; (vi) Investments in securities of trade creditors or
customers received pursuant to any plan of reorganization or similar arrangement
upon the bankruptcy or insolvency of such trade creditors or customers; (vii)
Investments made by the Company or the Restricted Subsidiaries as a result of
consideration received in connection with an Asset Sale made in compliance with
the covenant described under "-- Certain Covenants -- Limitation on Asset
Sales"; (viii) Investments in Persons, including, without limitation,
Unrestricted Subsidiaries and joint ventures, engaged in a business similar or
related to the businesses in which the Company and the Restricted Subsidiaries
are engaged on the Issue Date not to exceed $10.0 million at any one time
outstanding; and (ix) Investments in the Notes.
"Permitted Liens" means the following types of Liens:
(i) Liens for taxes, assessments or governmental charges or claims
either (a) not delinquent or (b) contested in good faith by appropriate
proceedings and as to which the Company or any Restricted Subsidiary shall
have set aside on its books such reserves as may be required pursuant to
GAAP;
(ii) statutory Liens of landlords and Liens of carriers, warehousemen,
mechanics, suppliers, materialmen, repairmen and other Liens imposed by law
incurred in the ordinary course of business for sums not yet delinquent or
being contested in good faith, if such reserve or other appropriate
provision, if any, as shall be required by GAAP shall have been made in
respect thereof;
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(iii) Liens incurred or deposits made in the ordinary course of
business in connection with workers' compensation, unemployment insurance
and other types of social security, including any Lien securing letters of
credit issued in the ordinary course of business consistent with past
practice in connection therewith, or to secure the performance of tenders,
statutory obligations, surety and appeal bonds, bids, leases, government
contracts, performance and return-of-money bonds and other similar
obligations (exclusive of obligations for the payment of borrowed money);
(iv) judgment Liens not giving rise to an Event of Default so long as
such Lien is adequately bonded and any appropriate legal proceedings which
may have been duly initiated for the review of such judgment shall not have
been finally terminated or the period within which such proceedings may be
initiated shall not have expired;
(v) easements, rights-of-way, zoning restrictions and other similar
charges or encumbrances in respect of real property not impairing in any
material respect the ordinary conduct of the business of the Company or any
of the Restricted Subsidiaries;
(vi) any interest or title of a lessor under any Capitalized Lease
Obligation; provided that such Liens do not extend to any property or
assets which is not leased property subject to such Capitalized Lease
Obligation;
(vii) purchase money Liens securing Indebtedness incurred to finance
property or assets of the Company or any Restricted Subsidiary acquired in
the ordinary course of business, and Liens securing Indebtedness which
Refinances any such Indebtedness; provided, however, that (A) the related
purchase money Indebtedness (or Refinancing Indebtedness) shall not exceed
the cost of such property or assets and shall not be secured by any
property or assets of the Company or any Restricted Subsidiary other than
the property and assets so acquired and (B) the Lien securing the purchase
money Indebtedness shall be created within 90 days of such acquisition;
(viii) Liens upon specific items of inventory or other goods and
proceeds of any Person securing such Person's obligations in respect of
bankers' acceptances issued or created for the account of such Person to
facilitate the purchase, shipment or storage of such inventory or other
goods;
(ix) Liens securing reimbursement obligations with respect to
commercial letters of credit which encumber documents and other property
relating to such letters of credit and products and proceeds thereof;
(x) Liens encumbering deposits made to secure obligations arising from
statutory, regulatory, contractual or warranty requirements of the Company
or any of the Restricted Subsidiaries, including rights of offset and
set-off;
(xi) Liens securing Interest Swap Obligations which Interest Swap
Obligations relate to Indebtedness that is otherwise permitted under the
Indenture;
(xii) Liens securing Indebtedness under Currency Agreements;
(xiii) Liens securing Acquired Indebtedness (and any Indebtedness
which Refinances such Acquired Indebtedness) incurred in accordance with
the covenant described under "-- Certain Covenants -- Limitation on
Incurrence of Additional Indebtedness"; provided that (A) such Liens
secured the Acquired Indebtedness at the time of and prior to the
incurrence of such Acquired Indebtedness by the Company or a Restricted
Subsidiary and were not granted in connection with, or in anticipation of
the incurrence of such Acquired Indebtedness by the Company or a Restricted
Subsidiary and (B) such Liens do not extend to or cover any property or
assets of the Company or of any of the Restricted Subsidiaries other than
the property or assets that secured the Acquired Indebtedness prior to the
time such Indebtedness became Acquired Indebtedness of the Company or a
Restricted Subsidiary; and
(xiv) Liens securing Indebtedness of Foreign Restricted Subsidiaries
that are not Guarantors incurred in accordance with the Indenture; provided
that such Liens do not extend to any property or assets other than property
or assets of Foreign Restricted Subsidiaries that are not Guarantors.
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"Person" means an individual, partnership, corporation, unincorporated
organization, trust or joint venture, or a governmental agency or political
subdivision thereof.
"Preferred Stock" of any Person means any Capital Stock of such Person that
has preferential rights to any other Capital Stock of such Person with respect
to dividends or redemptions or upon liquidation.
"Public Equity Offering" has the meaning set forth under
"-- Redemption -- Optional Redemption upon Public Equity Offerings."
"Purchase Money Indebtedness" means Indebtedness of the Company or any
Restricted Subsidiary incurred for the purpose of financing all or any part of
the purchase price or the cost of construction or improvement of any property,
provided that the aggregate principal amount of such Indebtedness does not
exceed the lesser of the fair market value of such property or such purchase
price or cost.
"Qualified Capital Stock" means any Capital Stock that is not Disqualified
Capital Stock.
"Reference Date" has the meaning set forth under "-- Certain
Covenants -- Limitation on Restricted Payments."
"Refinance" means in respect of any security or Indebtedness, to refinance,
extend, renew, refund, repay, prepay, redeem, defease or retire, or to issue a
security or Indebtedness in exchange or replacement for, such security or
Indebtedness in whole or in part. "Refinanced" and "Refinancing" shall have
correlative meanings.
"Refinancing Indebtedness" means any Refinancing by the Company or any
Restricted Subsidiary of Indebtedness incurred in accordance with the covenant
described under "-- Certain Covenants -- Limitation on Incurrence of Additional
Indebtedness" (other than pursuant to clause (ii), (iv), (v), (vi), (vii),
(viii), (ix), (xi), (xii) and (xiii) of the definition of Permitted
Indebtedness), in each case that does not (1) result in an increase in the
aggregate principal amount of any Indebtedness of such Person as of the date of
such proposed Refinancing (plus the amount of any premium reasonably necessary
to Refinance such Indebtedness and plus the amount of reasonable expenses
incurred by the Company in connection with such Refinancing) or (2) create
Indebtedness with (A) a Weighted Average Life to Maturity that is less than the
Weighted Average Life to Maturity of the Indebtedness being Refinanced or (B) a
final maturity earlier than the final maturity of the Indebtedness being
Refinanced; provided that if such Indebtedness being Refinanced is Indebtedness
of the Company or a Guarantor, then such Refinancing Indebtedness shall be
Indebtedness solely of the Company and/or Guarantors.
"Registration Rights Agreement" means the Registration Rights Agreement
dated the Issue Date among the Company, the Guarantors and the Initial
Purchasers.
"Replacement Assets" means assets and property that will be used in the
business of the Company and/or its Restricted Subsidiaries as existing on the
Issue Date or in a business the same, similar or reasonably related thereto
(including Capital Stock of a Person which becomes a Restricted Subsidiary if
such Person is engaged in businesses which comply with the covenant described
under "-- Certain Covenants -- Conduct of Business").
"Representative" means the indenture trustee or other trustee, agent or
representative in respect of any Designated Senior Debt; provided that if, and
for so long as, any Designated Senior Debt lacks such a representative, then the
Representative for such Designated Senior Debt shall at all times constitute the
holders of a majority in outstanding principal amount of such Designated Senior
Debt in respect of any Designated Senior Debt.
"Restricted Payment" has the meaning set forth under "-- Certain
Covenants -- Limitation on Restricted Payments."
"Restricted Subsidiary" means any Subsidiary of the Company that has not
been designated by the Board of Directors of the Company, by a Board Resolution
delivered to the Trustee, as an Unrestricted Subsidiary pursuant to and in
compliance with the covenant described under "-- Certain Covenants -- Limitation
on Designations of Unrestricted Subsidiaries." Any such Designation may be
revoked by a Board Resolution of the Company delivered to the Trustee, subject
to the provisions of such covenant.
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"Revocation" has the meaning set forth under "-- Certain
Covenants -- Limitation on Designations of Unrestricted Subsidiaries."
"Sale and Leaseback Transaction" means any direct or indirect arrangement
with any Person or to which any such Person is a party, providing for the
leasing to the Company or a Restricted Subsidiary of any property, whether owned
by the Company or any Restricted Subsidiary at the Issue Date or later acquired,
which has been or is to be sold or transferred by the Company or such Restricted
Subsidiary to such Person or to any other Person from whom funds have been or
are to be advanced by such Person on the security of such Property.
"Securities Act" means the Securities Act of 1933, as amended, or any
successor statute or statutes thereto, and the rules and regulations of the
Commission promulgated thereunder.
"Senior Debt" means the principal of, premium, if any, and interest
(including any interest accruing subsequent to the filing of a petition of
bankruptcy at the rate provided for in the documentation with respect thereto,
whether or not such interest is an allowed claim under applicable law) on any
Indebtedness of the Company, whether outstanding on the Issue Date or thereafter
created, incurred or assumed, unless, in the case of any particular
Indebtedness, the instrument creating or evidencing the same or pursuant to
which the same is outstanding expressly provides that such Indebtedness shall
not be senior in right of payment to the Notes. Without limiting the generality
of the foregoing, "Senior Debt" shall also include the principal of, premium, if
any, interest (including any interest accruing subsequent to the filing of a
petition of bankruptcy at the rate provided for in the documentation with
respect thereto, whether or not such interest is an allowed claim under
applicable law) on, and all other amounts owing in respect of, (x) all monetary
obligations of every nature of the Company under the Credit Agreement,
including, without limitation, obligations to pay principal and interest
reimbursement obligations under letters of credit, fees, expenses and
indemnities, (y) all Interest Swap Obligations and (z) all obligations under
Currency Agreements, in each case whether outstanding on the Issue Date or
thereafter incurred. Notwithstanding the foregoing, "Senior Debt" shall not
include (i) any Indebtedness of the Company to a Restricted Subsidiary or any
Affiliate of the Company or any of such Affiliate's Subsidiaries, (ii)
Indebtedness to, or guaranteed on behalf of, any shareholder, director, officer
or employee of the Company or any Restricted Subsidiary (including without
limitation, amounts owed for compensation), (iii) Indebtedness to trade
creditors and other amounts incurred in connection with obtaining goods,
materials or services, (iv) Indebtedness represented by Disqualified Capital
Stock, (v) any liability for federal, state, local or other taxes owed by the
Company, (vi) Indebtedness incurred in violation of the covenant described under
"-- Certain Covenants -- Limitation on Incurrence of Additional Indebtedness,"
(vii) Indebtedness which, when incurred and without respect to any election
under Section 1111(b) of Title 11, United States Code, is without recourse to
the Company and (viii) any Indebtedness which is, by its express terms,
subordinated in right of payment to any other Indebtedness of the Company.
"Significant Subsidiary" means, with respect to any Person, any Restricted
Subsidiary of such Person that satisfies the criteria for a "significant
subsidiary" set forth in Rule 1.02(w) of Regulation S-X under the Securities
Act.
"Subsidiary," with respect to any Person, means (i) any corporation of
which the outstanding Capital Stock having at least a majority of the votes
entitled to be cast in the election of directors under ordinary circumstances
shall at the time be owned, directly or indirectly, by such Person or (ii) any
other Person of which at least a majority of the voting interest under ordinary
circumstances is at the time, directly or indirectly, owned by such Person.
"Surviving Entity" has the meaning set forth under "-- Certain
Covenants -- Merger, Consolidation and Sale of Assets."
"Unrestricted Subsidiary" means any Subsidiary of the Company designated as
such pursuant to and in compliance with the covenant described under "-- Certain
Covenants -- Limitation on Designations of Unrestricted Subsidiaries." Any such
designation may be revoked by a Board Resolution of the Company delivered to the
Trustee, subject to the provisions of such covenant.
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"Weighted Average Life to Maturity" means, when applied to any Indebtedness
at any date, the number of years obtained by dividing (a) the then outstanding
aggregate principal amount of such Indebtedness into (b) the sum of the total of
the products obtained by multiplying (i) the amount of each then remaining
installment, sinking fund, serial maturity or other required payment of
principal, including payment at final maturity, in respect thereof, by (ii) the
number of years (calculated to the nearest one-twelfth) which will elapse
between such date the making of such payment.
"Wholly Owned Restricted Subsidiary" of the Company means any Restricted
Subsidiary of which all the outstanding voting securities (other than in the
case of a Foreign Restricted Subsidiary, directors' qualifying shares or an
immaterial amount of shares required to be owned by other Persons pursuant to
applicable law) are owned by the Company or any Wholly Owned Restricted
Subsidiary.
THE EXCHANGE OFFER
Pursuant to the Registration Rights Agreement, the Company agreed to file
with the SEC the Exchange Offer Registration Statement on the appropriate form
under the Securities Act with respect to an offer to exchange the Original Notes
for the Exchange Notes. Upon the effectiveness of the Exchange Offer
Registration Statement, the Company will offer to the holders of Original Notes
who are able to make certain representations the opportunity to exchange their
Original Notes for Exchange Notes. If (i) the Company is not permitted to file
the Exchange Offer Registration Statement or to consummate the Exchange Offer
because the Exchange Offer is not permitted by applicable law or SEC policy or
(ii) any holder of Original Notes notifies the Company within the specified time
period that (A) due to a change in law or policy it is not entitled to
participate in the Exchange Offer, (B) due to a change in law or policy it may
not resell the Exchange Notes acquired by it in the Exchange Offer to the public
without delivering a prospectus and the prospectus contained in the Exchange
Offer Registration Statement is not appropriate or available for such resales by
such holder or (C) it is a broker-dealer and owns Original Notes acquired
directly from the Company or an affiliate of the Company, the Company will file
with the SEC the Shelf Registration Statement to cover resales of the Transfer
Restricted Notes (as defined) by the holders thereof. The Company will use
reasonable efforts to cause the applicable registration statement to be declared
effective as promptly as possible by the SEC. For purposes of the foregoing,
"Transfer Restricted Notes" means each Original Note until (i) the date on which
such Original Note has been exchanged by a person other than a broker-dealer for
an Exchange Note in the Exchange Offer, (ii) following the exchange by a
broker-dealer in the Exchange Offer of an Original Note for an Exchange Note,
the date on which such Exchange Note is sold to a purchaser who receives from
such broker-dealer on or prior to the date of such sale a copy of the prospectus
contained in the Exchange Offer Registration Statement, (iii) the date on which
said Original Note has been effectively registered under the Securities Act and
disposed of in accordance with the Shelf Registration Statement or (iv) the date
on which such Original Note is distributed to the public pursuant to Rule 144
under the Securities Act.
Under existing SEC interpretations, the Transfer Restricted Notes would, in
general, be freely transferable after the Exchange Offer without further
registration under the Securities Act; provided that in the case of
broker-dealers participating in the Exchange Offer, a prospectus meeting the
requirements of the Securities Act will be delivered upon resale by such
broker-dealer in connection with resales of the Exchange Notes. The Company has
agreed, for a period of 180 days after consummation of the Exchange Offer, to
make available a prospectus meeting the requirements of the Securities Act to
any such broker-dealer for use in connection with any resale of any Exchange
Notes acquired in the Exchange Offer. A broker-dealer which delivers such a
prospectus to purchasers in connection with such resales will be subject to
certain of the civil liability provisions under the Securities Act and will be
bound by the provisions of the Registration Rights Agreement (including certain
indemnification rights and obligations).
Each holder of the Original Notes who wishes to exchange such Notes for
Exchange Notes in the Exchange Offer will be required to make certain
representations, including representations that (i) any Exchange Notes to be
received by it will be acquired in the ordinary course of its business, (ii) it
has no arrangement with any person to participate in the distribution of the
Exchange Notes and (iii) it is not an
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"affiliate," as defined in Rule 405 of the Securities Act, of the Company or, if
it is an affiliate, it will comply with the registration and prospectus delivery
requirements of the Securities Act to the extent applicable.
If the holder is not a broker-dealer, it will be required to represent that
it is not engaged in, and does not intend to engage in, the distribution of the
Exchange Notes. If the holder is a broker-dealer that will receive Exchange
Notes for its own account in exchange for Original Notes that were acquired as a
result of market-making activities or other trading activities, it will be
required to acknowledge that it will deliver a prospectus in connection with any
resale of such Exchange Notes.
The Registration Rights Agreement provides that: (i) unless the Exchange
Offer would not be permitted by applicable law or SEC policy, the Company will
file an Exchange Offer Registration Statement with the SEC on or prior to 60
days after the date of original issuance of the Original Notes (the "Closing
Date"), (ii) unless the Exchange Offer would not be permitted by applicable law
or SEC policy, the Company will use its best efforts to have the Exchange Offer
Registration Statement declared effective by the SEC on or prior to 120 days
after the Closing Date, (iii) unless the Exchange Offer would not be permitted
by applicable law or SEC policy, the Company will commence the Exchange Offer
and use reasonable efforts to issue, on or prior to 20 business days after the
date on which the Exchange Offer Registration Statement was declared effective
by the SEC, Exchange Notes in exchange for all Original Notes tendered prior
thereto in the Exchange Offer and (iv) if obligated to file the Shelf
Registration Statement the Company will file the Shelf Registration Statement
prior to the later of (x) 60 days after the Closing Date or (y) 30 days after
such filing obligation arises, and use its best efforts to cause the Shelf
Registration Statement to be declared effective by the SEC on or prior to the
later of (x) 120 days after the Closing Date and (y) 90 days after such
obligation arises; provided that if the Company has not consummated the Exchange
Offer within 150 days of the Closing Date, then the Company will, upon the
request of any holder of Original Notes, file the Shelf Registration Statement
with the SEC on or prior to the 151st day after the Closing Date. The Company
shall use its best efforts to keep such Shelf Registration Statement
continuously effective, supplemented and amended until the second anniversary of
the Closing Date or such shorter period that will terminate when all the
Transfer Restricted Notes covered by the Shelf Registration Statement have been
sold pursuant thereto. If (a) the Company fails to file any of the registration
statements required by the Registration Rights Agreement on or before the date
specified for such filing, (b) any of such registration statements are not
declared effective by the Commission on or prior to the date specified for such
effectiveness (the "Effectiveness Target Date with respect to the Exchange Offer
Registration Statement") or (c) the Shelf Registration Statement or the Exchange
Offer Registration Statement is declared effective but thereafter, subject to
certain exceptions, ceases to be effective or usable in connection with the
Exchange Offer or resales of Transfer Restricted Notes, as the case may be,
during the periods specified in the Registration Rights Agreement (each such
event referred to in clauses (a) through (c) above, a "Registration Default"),
then the interest rate on Transfer Restricted Notes will increase ("Additional
Interest"), with respect to the first 90-day period immediately following the
occurrence of such Registration Default by 0.50% per annum and will increase by
an additional 0.50% per annum with respect to each subsequent 90-day period
until all Registration Defaults have been cured, up to a maximum amount of 1.50%
per annum. Following the cure of all Registration Defaults, the accrual of
Additional Interest will cease and the interest rate will revert to the original
rate.
The summary herein of certain provisions of the Registration Rights
Agreement is a description of the material provisions of the Registration Rights
Agreement, a copy of which is filed as an exhibit to the Exchange Offer
Registration Statement.
Except as set forth herein, after consummation of the Exchange Offer,
holders of Original Notes have no registration or exchange rights under the
Registration Agreement. See "--Consequences of Failure to Exchange," and "--
Resales of the Exchange Notes; Plan of Distribution."
CONSEQUENCES OF FAILURE TO EXCHANGE
The Original Notes which are not exchanged for Exchange Notes pursuant to
an Exchange Offer and are not included in a resale prospectus will remain
Transfer Restricted Notes. Accordingly, such Original Notes may not be offered,
sold or otherwise transferred prior to the date which is two years after the
later of the date
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of original issue and the last date that the Company or any affiliate of the
Company was the owner of such securities (or any predecessor thereto) (the
"Resale Restriction Termination Date") only (a) to the Company, (b) pursuant to
a registration statement which has been declared effective under the Securities
Act, (c) for so long as the Original Notes are eligible for resale pursuant to
Rule 144A, to a person the owner reasonably believes is a qualified
institutional buyer that purchases for its own account or for the account of a
qualified institutional buyer to whom notice is given that the transfer is being
made in reliance to Rule 144A, (d) to an "accredited investor" within the
meaning of subparagraph (1), (2), (3) or (7) of paragraph (a) of Rule 501 under
the Securities Act that is purchasing for his own account or for the account of
such an "accredited investor" in each case in a minimum of Original Notes with a
purchase price of $500,000, or (c) pursuant to any other available exemption
from the registration requirements of the Securities Act, subject in each of the
foregoing cases to any requirement of law that the disposition of its property
or the property of such investor account or accounts be at all times within its
or their control. The foregoing restrictions on resale will not apply subsequent
to the Resale Restriction Termination Date. If any resale or other transfer of
the Original Notes is proposed to be made pursuant to clause (d) above prior to
the Resale Restriction Termination Date, the transferor shall deliver a letter
from the transferee to the Company and the Trustee, which shall provide, among
other things, that the transferee is an "accredited investor" within the meaning
of subparagraph (1), (2), (3) or (7) of paragraph (a) of Rule 501 under the
Securities Act and that it is acquiring such securities for investment purposes
and not for distribution in violation of the Securities Act. Prior to any offer,
sale or other transfer of Original Notes prior to the Resale Restriction
Termination Date pursuant to clauses (d) or (e) above, the issuer and the
Trustee may require the delivery of an opinion of counsel, certifications and/or
other information satisfactory to each of them.
TERMS OF THE EXCHANGE OFFER
Upon the terms and subject to the conditions set forth in the Prospectus
and in the Letter of Transmittal, the form of which is included as Exhibit 99.1
to the Registration Statement of which this Prospectus is a part, the Company
will accept any and all Original Notes validly tendered and not withdrawn prior
to the applicable Expiration Date. The Company will issue $1,000 principal
amount of Exchange Notes in exchange for each $1,000 principal amount of
Original Notes accepted in the Exchange Offer. Holders may tender some or all of
their Original Notes pursuant to the Exchange Offer. However, Original Notes may
be tendered only in integral multiples of $1,000 principal amount.
The form and terms of the Exchange Notes are the same as the form and terms
of the Original Notes, except that (i) the Exchange Notes have been registered
under the Securities Act and therefore will not bear legends restricting their
transfer pursuant to the Securities Act, and (ii) the holders of Exchange Notes
will not be entitled to rights under the Registration Rights Agreement (except
under certain limited circumstances). The Exchange Notes will evidence the same
debt as the Original Notes (which they replace), and will be issued under, and
be entitled to the benefits of, the Indenture.
Solely for reasons of administration (and for no other purpose) the Company
has fixed the close of business on ,1998 as the record date
for the Exchange Offer for purposes of determining the persons to whom this
Prospectus and the Letter of Transmittal will be mailed initially. Only a
registered holder of Original Notes (or such holder's legal representative or
attorney-in-fact) as reflected on the records of the Trustee under the Indenture
may participate in the Exchange Offer. There will be no fixed record date for
determining registered holders of the Original Notes entitled to participate in
the Exchange Offer.
Holders of the Original Notes do not have any appraisal or dissenters'
rights under the General Corporation Law of Delaware or under the Indenture in
connection with the Exchange Offer. The Company intends to conduct the Exchange
Offer in accordance with the applicable requirements of the Exchange Act and the
rules and regulations of the SEC thereunder.
The Company shall be deemed to have accepted validly tendered Original
Notes when, as and if it has given oral or written notice thereof to the
Exchange Agent. The Exchange Agent will act as agent for the tendering holders
of the Original Notes for purposes of receiving the Exchange Notes.
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If any tendered Original Notes are not accepted for exchange because of an
invalid tender, the occurrence of certain other events set forth herein or
otherwise, certificates for any such unaccepted Original Notes will be returned
without expense, to the tendering holder thereof as promptly as practicable
after the Expiration Date.
Holders who tender Original Notes in the Exchange Offer will not be
required to pay brokerage commissions or fees or, subject to the instructions in
the Letter of Transmittal, transfer taxes with respect to the exchange of the
Original Notes pursuant to the Exchange Offer. The Company will pay all charges
and expenses, other than certain applicable taxes, in connection with the
Exchange Offer. See "--Fees and Expenses."
EXPIRATION DATE; EXTENSION; AMENDMENTS
The term "Expiration Date" shall mean 5:00 p.m., New York City time on
, 1998, unless the Company extends the Exchange Offer, in which case
the term "Expiration Date" shall mean the latest date and time to which such
Exchange Offer is extended.
In order to extend the Exchange Offer, the Company will notify the Exchange
Agent of any extension by oral or written notice and will make a public
announcement thereof, prior to 9:00 a.m., New York City time, on the next
Business Day after the previously scheduled Expiration Date.
The Company reserves the right, in its sole discretion, (i) to delay
accepting any Original Notes, (ii) extend the Exchange Offer, (iii) if the
condition set forth below under "--Conditions of the Exchange Offer" shall not
have been satisfied, to terminate the Exchange Offer, by giving oral or written
notice of such delay, extension or termination to the Exchange Agent, or (iv) to
amend the terms of the Exchange Offer in any manner. Any such delay in
acceptance, extension, termination or amendment will be followed as promptly as
practicable by a public announcement thereof. If the Exchange Offer is amended
in a manner determined by the Company to constitute a material change, it will
promptly disclose such amendment by means of a prospectus supplement that will
be distributed to the registered holders of the Original Notes and the Exchange
Offer will be extended for a period of five to ten business days, as required by
law, depending upon the significance of the amendment and the manner of
disclosure to the registered holders, if the Exchange Offer would otherwise
expire during such five to ten business day period.
Without limiting the manner in which the Company may choose to make public
announcement of any delay, extension, termination or amendment of its Exchange
Offer, the Company shall not have an obligation to publish, advertise, or
otherwise communicate any such public announcement, other than by making a
timely release thereof to the Dow Jones News Service.
PROCEDURES FOR TENDERING
Only a registered holder of Original Notes may tender such Original Notes
in the Exchange Offer. To tender in the Exchange Offer, a holder must complete,
sign and date the Letter of Transmittal, have the signatures thereon guaranteed
if required by such Letter of Transmittal, and mail or otherwise deliver such
Letter of Transmittal to the Exchange Agent at the address set forth below under
"--Exchange Agent" for receipt prior to the applicable Expiration Date. In
addition, either (i) certificates for such Original Notes must be received by
the Exchange Agent along with the Letter of Transmittal, or (ii) a timely
confirmation of a book-entry transfer (a "Book-Entry Confirmation") of such
Original Notes into the Exchange Agent's account at The Depository Trust Company
(the "Book-Entry Transfer Facility") pursuant to the procedure for book-entry
transfer described below, must be received by the Exchange Agent prior to the
applicable Expiration Date, or (iii) the Holder must comply with the guaranteed
delivery procedures described below. To be tendered effectively, the Letter of
Transmittal and all other required documents must be received by the Exchange
Agent at the address set forth below under "--Exchange Agent" prior to the
applicable Expiration Date.
The tender by a Holder will constitute an agreement between such Holder and
the Company in accordance with the terms and subject to the conditions set forth
herein and in the Letter of Transmittal applicable to such Exchange Offer.
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THE METHOD OF DELIVERY OF THE ORIGINAL NOTES AND THE APPLICABLE LETTER OF
TRANSMITTAL AND ALL OTHER REQUIRED DOCUMENTS TO THE EXCHANGE AGENT IS AT THE
ELECTION AND RISK OF THE HOLDER. INSTEAD OF DELIVERY BY MAIL, IT IS RECOMMENDED
THAT HOLDERS USE AN OVERNIGHT OR HAND DELIVERY SERVICE. IN ALL CASES, SUFFICIENT
TIME SHOULD BE ALLOWED TO ASSURE DELIVERY TO THE EXCHANGE AGENT BEFORE THE
APPLICABLE EXPIRATION DATE. NO LETTER OF TRANSMITTAL OR ORIGINAL NOTES SHOULD BE
SENT TO THE COMPANY. HOLDERS MAY REQUEST THEIR RESPECTIVE BROKERS, DEALERS,
COMMERCIAL BANKS, TRUST COMPANIES OR NOMINEES TO EFFECT THE ABOVE TRANSACTIONS
FOR SUCH HOLDERS.
Any beneficial owner whose Original Notes are registered in the name of a
broker, dealer, commercial bank, trust company or other nominee and who wishes
to tender should contact the registered holder promptly and instruct such
registered Holder to tender on such beneficial owner's behalf. If such
beneficial owner wishes to tender on such owner's behalf, such owner must, prior
to completing and executing the Letter of Transmittal and delivering such
owner's Original Notes, either make appropriate arrangements to register
ownership of the Original Notes in such beneficial owner's name or obtain a
properly completed bond power from the registered holder. The transfer of
registered ownership may take considerable time.
Signatures on a Letter of Transmittal or a notice of withdrawal, as the
case may be, must be guaranteed by an Eligible Institution (as defined below)
unless the Original Notes tendered pursuant thereto are tendered (i) by a
registered holder who has not completed the box entitled "Special Delivery
Instructions" on the Letter of Transmittal designated for such Original Discount
Notes, or (ii) for the account of an Eligible Institution. In the event that
signatures on a Letter of Transmittal or a notice of withdrawal, as the case may
be, are required to be guaranteed, such guarantee must be by a participant in a
recognized signature guarantee program within the meaning of Rule 17Ad-15 under
the Exchange Act (an "Eligible Institution").
If a Letter of Transmittal is signed by a person other than the registered
holder of any Original Notes listed therein, such Original Notes must be
endorsed or accompanied by a properly completed bond power, signed by such
registered holder as such registered holder's name appears on such Original
Notes, with signature guaranteed by an Eligible Institution.
If a Letter of Transmittal or any Original Notes or bond powers are signed
by trustees, executors, administrators, guardians, attorneys-in-fact, officers
of corporations or others acting in a fiduciary or representative capacity, such
persons should so indicate when signing, and evidence satisfactory to the
Company, as applicable, of their authority to so act must be submitted with the
Letter of Transmittal designated for such Original Notes.
All questions as to the validity, form, eligibility (including time of
receipt), acceptance and withdrawal of tendered Original Notes will be
determined by the Company in its sole discretion, which determination will be
final and binding. The Company reserves the absolute right to reject any and all
Original Notes not properly tendered or any Original Notes the issuer's
acceptance of which would, in the opinion of counsel for such issuer, be
unlawful. The Company also reserves the right to waive any defects,
irregularities or conditions of tender as to particular Original Notes. The
interpretation of the terms and conditions of the Exchange Offer (including the
instructions in the Letter of Transmittal) by the Company will be final and
binding on all parties. Unless waived, any defects or irregularities in
connection with tenders of Original Notes must be cured within such time as the
Company shall determine. Although the Company intends to notify holders of
defects or irregularities with respect to tenders of Original Notes issued by
it, neither the Company, the Exchange Agent nor any other person shall incur any
liability for failure to give such notification. Tenders of Original Notes will
not be deemed to have been made until such defects or irregularities have been
cured or waived. Any Original Notes received by the Exchange Agent that are not
validly tendered and as to which the defects or irregularities have not been
cured or waived, or if Original Notes are submitted in a principal amount
greater than the principal amount of Original Notes being tendered by such
tendering holder, such unaccepted or non-exchanged Original Notes will be
returned by the Exchange Agent to the tendering holders (or, in the case of
Original Notes tendered by book-entry transfer into the Exchange Agent's account
at the Book-Entry Transfer Facility pursuant to the book-entry transfer
procedures described below, such unaccepted or non-
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exchanged Original Notes will be credited to an account maintained with such
Book-Entry Transfer Facility), unless otherwise provided in the Letter of
Transmittal designated for such Original Notes, as soon as practicable following
the applicable Expiration Date.
By tendering Original Notes in the Exchange Offer, each registered holder
will represent to the issuer of such Original Notes that, among other things,
(i) the Exchange Notes to be acquired by the holder and any beneficial owner(s)
of such Original Notes ("Beneficial Owner(s)") in connection with the Exchange
Offer are being acquired by the holder and any Beneficial Owner(s) in the
ordinary course of business of the holder and any Beneficial Owner(s) for such
holder's own account, for investment and not with a view to or for sale in
connection with any distribution of the Exchange Notes, (ii) the holder and each
Beneficial Owner are not participating, do not intend to participate, and have
no arrangement or understanding with any person to participate, in a
distribution of the Exchange Notes, (iii) the holder and each Beneficial Owner
acknowledge and agree that (x) any person participating in an Exchange Offer for
the purpose of distributing the Exchange Notes must comply with the registration
and prospectus delivery requirements of the Securities Act in connection with a
secondary resale transaction with respect to the Exchange Notes acquired by such
person and cannot rely on the position of the staff of the SEC set forth in
no-action letters that are discussed herein under "-- Resales of the Exchange
Notes," and (y) any broker-dealer that receives Exchange Notes for its own
account in exchange for Original Notes pursuant to an Exchange Offer, where such
Original Notes were acquired by such broker-dealer as a result of market-making
activities or other trading activities, must deliver a prospectus in connection
with any resale of such Exchange Notes (see "Plan of Distribution") but by so
acknowledging, the holder shall not be deemed to admit that, by delivering a
prospectus, it is an "underwriter" within the meaning of the Securities Act,
(iv) neither the holder nor any Beneficial Owner is an "affiliate," as defined
in Rule 405 under the Securities Act, of the Company except as otherwise
disclosed to the Company in writing, and (v) the holder and each Beneficial
Owner understands that a secondary resale transaction described in clause (iii)
above should be covered by an effective registration statement containing the
selling securityholder information required by Item 507 of Regulation S-K of the
SEC.
BOOK-ENTRY TRANSFER
The Exchange Agent will make a request to establish an account with respect
to the Original Notes at the Book-Entry Transfer Facility, for purposes of the
Exchange Offer, within two business days after the date of this Prospectus, and
any financial institution that is a participant in the Book-Entry Transfer
Facility's system may make book-entry delivery of Original Notes by causing the
Book-Entry Transfer Facility to transfer such Original Notes into the Exchange
Agent's account at the Book-Entry Transfer Facility in accordance with such
Book-Entry Transfer Facility's procedures for transfer. However, although
delivery of Original Notes may be effected through book-entry transfer at the
Book-Entry Transfer Facility, the applicable Letter of Transmittal, with any
required signature guarantees and any other documents, must be transmitted to
and received by the Exchange Agent at the address set forth below under
"--Exchange Agent" on or prior to the applicable Expiration Date or the
guaranteed delivery procedures described below must be complied with.
GUARANTEED DELIVERY PROCEDURES
Holders who wish to tender their Original Notes and (i) whose Original
Notes are not immediately available, or (ii) who cannot deliver their Original
Notes, the Letter of Transmittal or any other required documents to the Exchange
Agent prior to the applicable Expiration Date, may effect a tender if:
(1) The tender is made through an Eligible Institution;
(2) Prior to the applicable Expiration Date, the Exchange Agent
receives from such Eligible Institution a properly completed and duly
executed Notice of Guaranteed Delivery (by mail, hand delivery or facsimile
transmission) setting forth the name and address of the Holder, the
certificate number(s) of such Original Notes and the principal amount of
the Original Notes being tendered, stating that the tender is being made
thereby and guaranteeing that, within five business days after the
applicable Expiration Date, the applicable Letter of Transmittal together
with the certificate(s) representing the Original Notes (or a Book-Entry
Confirmation) and any other documents required by the applicable Letter of
Transmittal will be delivered by the Eligible Institution to the Exchange
Agent; and
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(3) Such properly completed and executed Letter of Transmittal, as
well as the certificate(s) representing all tendered Original Notes in
proper form for transfer (or a Book-Entry Confirmation) and all other
documents required by the Letter of Transmittal are received by the
Exchange Agent within five business days after the applicable Expiration
Date.
WITHDRAWAL OF TENDERS
Except as otherwise provided herein, tenders of Original Notes pursuant to
an Exchange Offer may be withdrawn, unless theretofore accepted for exchange as
provided in the applicable Exchange Offer, at any time prior to the Expiration
Date of that Exchange Offer.
To be effective, a written or facsimile transmission notice of withdrawal
must be received by the Exchange Agent at its address set forth herein prior to
the Expiration Date. Any such notice of withdrawal must (i) specify the name of
the person having deposited the Original Notes to be withdrawn (the
"Depositor"), (ii) identify the Original Notes to be withdrawn (including the
certificate number or numbers and aggregate principal amount of such Original
Notes), and (iii) be signed by the holder in the same manner as the original
signature on the applicable Letter of Transmittal (including any required
signature guarantees). All questions as to the validity, form and eligibility
(including time of receipt) of such notices will be determined by the Company in
its sole respective discretion, which determination shall be final and binding
on all parties. Any Original Notes so withdrawn will be deemed not to have been
validly tendered for purposes of the Exchange Offer and no Exchange Notes will
be issued with respect thereto unless the Original Notes so withdrawn are
retendered. Properly withdrawn Original Notes may be retendered by following one
of the procedures described above under "--Procedures for Tendering" at any time
prior to the applicable Expiration Date.
Any Original Notes which have been tendered but which are not accepted for
exchange due to the rejection of the tender due to uncured defects or the prior
termination of the applicable Exchange Offer, or which have been validly
withdrawn, will be returned to the holder thereof (unless otherwise provided in
the Letter of Transmittal), as soon as practicable following the applicable
Expiration Date or, if so requested in the notice of withdrawal, promptly after
receipt by the issuer of the Original Notes of notice of withdrawal without cost
to such holder.
CONDITIONS OF THE EXCHANGE OFFER
The Exchange Offer is subject to the condition that the Exchange Offer, or
the making of any exchange by a holder, does not violate applicable law or any
applicable interpretation of the staff of the SEC. If there has been a change in
SEC policy such that there is a substantial question whether the Exchange Offer
is permitted by applicable federal law, the Company has agreed to seek a
no-action letter or other favorable decision from the SEC allowing the Company
to consummate the Exchange Offer.
If the Company determines that the Exchange Offer is not permitted by
applicable Federal law, it may terminate the Exchange Offer. In connection
therewith the Company may (i) refuse to accept any Original Notes and return any
Original Notes that have been tendered by the holders thereof, (ii) extend the
Exchange Offer and retain all Original Notes tendered prior to the Expiration of
the Exchange Offer, subject to the rights of such holders of tendered Original
Notes to withdraw their tendered Original Notes, or (iii) waive such termination
event with respect to the Exchange Offer and accept all properly tendered
Original Notes that have not been withdrawn. If such waiver constitutes a
material change in the Exchange Offer, the Company will disclose such change by
means of a supplement to this Prospectus that will be distributed to each
registered holder of Original Notes, and the Company will extend the Exchange
Offer for a period of five to ten business days, depending upon the significance
of the waiver and the manner of disclosure to the registered holders of the
Original Notes, if the Exchange Offer would otherwise expire during such period.
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EXCHANGE AGENT
State Street Bank and Trust Company has been appointed as "Exchange Agent"
for the Exchange Offer. Questions and requests for assistance, requests for
additional copies of the Prospectus or of the Letter of Transmittal and other
documents should be directed to the Exchange Agent addressed as follows:
By Registered or Certified Mail or Hand or Overnight Delivery:
State Street Bank and Trust Company
Two International Place
Fourth Floor
Boston, MA 02110
Attention: Kellie Mullen, Corporate Trust Department
Facsimile Transmissions: 617-664-3290
Confirm by Telephone: 617-664-5587
(ELIGIBLE INSTITUTIONS ONLY)
Delivery to other than the above addresses or facsimile numbers will not
constitute a valid delivery.
FEES AND EXPENSES
The expenses of soliciting tenders will be borne by the Company. The
principal solicitation is being made by mail; however, additional solicitation
may be made by telegraph, telephone or in person by officers and regular
employees of the Company and its affiliates.
No dealer-manager has been retained in connection with the Exchange Offer
and no payments will be made to brokers, dealers or others soliciting acceptance
of the Exchange Offer. However, reasonable and customary fees will be paid to
the Exchange Agent for its service and it will be reimbursed for its reasonable
out-of-pocket expenses in connection therewith.
The cash expenses to be incurred in connection with the Exchange Offer will
be paid by the Company and are estimated in the aggregate to be approximately
$ . Such expenses include fees and expenses of the Exchange Agent and the
Trustee under the Indenture, accounting and legal fees and printing costs, among
others. The Company will pay all transfer taxes, if any, applicable to the
exchange of the Original Notes pursuant to the Exchange Offer. If, however, a
transfer tax is imposed for any reason other than the exchange of the Original
Notes pursuant to the Exchange Offer, then the amount of any such transfer taxes
(whether imposed on the registered holder or any other persons) will be payable
by the tendering holder. If satisfactory evidence of payment of such taxes or
exemption therefrom is not submitted with the Letter of Transmittal, the amount
of such transfer taxes will be billed directly to such tendering holder.
ACCOUNTING TREATMENT
The carrying values of the Original Notes are not expected to be materially
different from the fair value of the Exchange Notes at the time of the exchange.
Accordingly, no gain or loss for accounting purposes will be recognized. The
expenses of the Exchange Offer will be amortized over the term of the Exchange
Notes.
RESALES OF THE EXCHANGE NOTES; PLAN OF DISTRIBUTION
Based on no-action letters issued by the staff of the SEC to third parties,
the Company believes the Exchange Notes issued pursuant to the Exchange Offer in
exchange for the Original Notes may be offered for resale, resold and otherwise
transferred by any holder thereof (other than (i) a broker-dealer who purchased
such Original Notes directly from the Company to resell pursuant to Rule 144A or
any other available exemption under the Securities Act or (ii) a person that is
an "affiliate" of the Company within the meaning of Rule 405 under the
Securities Act) without compliance with the registration and prospectus delivery
provisions of the Securities Act provided that the holder is acquiring the
Exchange Notes in its ordinary course of business and is not participating, and
has no arrangement or understanding with any person to participate, in the
distribution of the Exchange Notes. Holders of Original Notes wishing to accept
the Exchange Offer must represent to the Company that such conditions have been
met. In the event that the Company's belief is inaccurate, holders of Exchange
Notes who transfer Exchange Notes in violation of the prospectus delivery
71
<PAGE> 76
provisions of the Securities Act and without an exemption from registration
thereunder may incur liability under the Securities Act. The Company does not
assume or indemnify holders against such liability.
All resales must be made in compliance with applicable state securities or
"blue sky" laws. Such compliance may require that the Exchange Notes be
registered or qualified in a particular state or that the resales be made by or
through a licensed broker-dealer, unless exemptions from these requirements are
available. The Company assumes no responsibility with regard to compliance with
such requirements.
Each affiliate of the Company must acknowledge that such person will comply
with the registration and prospectus delivery requirements of the Securities Act
to the extent applicable. Each broker-dealer that receives Exchange Notes in
exchange for Original Notes held for its own account, as a result of market-
making or other trading activities, must acknowledge that it will deliver a
prospectus in connection with any resale of such Exchange Notes. Although a
broker-dealer may be an "underwriter" within the meaning of the Securities Act,
the Letter of Transmittal states that by so acknowledging and by delivering a
prospectus, a broker-dealer will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act. This Prospectus, as it
may be amended or supplemented from time to time, may be used by a broker-dealer
in connection with resales of Exchange Notes received in exchange for Original
Notes.
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
The following is a summary of certain federal income tax consequences
associated with the acquisition, ownership, and disposition of the Exchange
Notes by holders who exchange Original Notes for the Exchange Notes. The
following summary assumes that the issue price of the Exchange Notes is equal to
the principal amount. The summary does not discuss all of the aspects of federal
income taxation that may be relevant to a prospective holder of the Exchange
Notes in light of his or her particular circumstances, or to certain types of
holders (including dealers in securities, insurance companies, tax-exempt
organizations, financial institutions, broker-dealers, S corporations, and
persons who hold the Notes as part of a hedge, straddle, "synthetic security" or
other integrated investment) which are subject to special treatment under the
federal income tax laws. This discussion also does not address the tax
consequences to nonresident aliens, foreign corporations, foreign partnerships
or foreign trusts that are subject to United States federal income tax on a net
basis on income with respect to an Exchange Note because such income is
effectively connected with the conduct of a U.S. trade or business. Such holders
generally are taxed in a similar manner to U. S. Holders (as defined below);
however, certain special rules apply. In addition, this discussion is limited to
holders who hold the Exchange Notes as capital assets within the meaning of
Section 1221 of the Internal Revenue Code of 1986, as amended (the "Code"). This
summary also does not describe any tax consequences under state, local, or
foreign tax laws.
The discussion is based upon the Code, Treasury Regulations, Internal
Revenue Service ("IRS") rulings and pronouncements, and judicial decisions all
in effect as of the date hereof, all of which are subject to change at any time
by legislative, judicial or administrative action. Any such changes may be
applied retroactively in a manner that could adversely affect a holder of the
Exchange Notes. The Company has not sought and will not seek any rulings or
opinions from the IRS or counsel with respect to the matters discussed below.
There can be no assurance that the IRS will not take positions concerning the
tax consequences of the purchase, ownership or disposition of the Exchange Notes
which are different from those discussed herein.
HOLDERS WHO EXCHANGE ORIGINAL NOTES FOR EXCHANGE NOTES SHOULD CONSULT THEIR
OWN TAX ADVISORS WITH RESPECT TO THE U.S. FEDERAL INCOME TAX CONSEQUENCES THAT
MAY APPLY TO THEM, AS WELL AS THE APPLICATION OF STATE, LOCAL, FOREIGN AND OTHER
TAX LAWS.
EXCHANGE OF ORIGINAL NOTES FOR EXCHANGE NOTES
The exchange of an Original Note by a holder for an Exchange Note should
not constitute a taxable exchange of the Original Note. As a result, a holder
will not recognize taxable gain or loss upon receipt of an Exchange Note, such
holder's holding period for an Exchange Note will include the holding period for
the
72
<PAGE> 77
Original Note so exchanged and such holder's adjusted tax basis in an Exchange
Note will be the same as such holder's adjusted tax basis in the Original Note
so exchanged.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES TO U.S. HOLDERS
In general, a U.S. Holder is: (i) a citizen or resident (as defined for
United States federal income tax purposes) of the United States; (ii) a
corporation or partnership organized in or under the laws of the United States
or a political subdivision thereof; (iii) an estate the income of which is
subject to United States federal taxation regardless of its source; or (iv) a
trust if and only if (A) a court within the United States is able to exercise
primary supervision over the administration of the trust and (B) one or more
United States trustees have the authority to control all substantial decisions
of the trust.
Taxation of Stated Interest. In general, U.S. Holders of the Exchange
Notes will be required to include interest received thereon in taxable income as
ordinary income at the time it accrues or is received, in accordance with the
holder's regular method of accounting for federal income tax purposes.
Sale or Other Taxable Disposition of the Exchange Notes. The sale,
exchange, redemption, retirement or other taxable disposition of an Exchange
Note will in general result in the recognition of gain or loss to a U.S. Holder
in an amount equal to the difference between (a) the amount of cash and fair
market value of property received in exchange therefor (except to the extent
attributable to the payment of accrued but unpaid stated interest) and (b) the
holder's adjusted tax basis in such Exchange Note.
Any gain or loss on the sale or other taxable disposition of an Exchange
Note generally will be capital gain or loss and will be long-term capital gain
or loss if the Exchange Note had been held for more than one year and otherwise
will be short-term capital gain or loss. Payments on such disposition for
accrued interest not previously included in income will be treated as ordinary
interest income.
Backup Withholding. In October 1997, the Treasury Department issued final
regulations relating to information and back-up withholding that unify current
certification procedures and forms and clarify reliance standards. These new
regulations will be effective on January 1, 1999. The following description of
the backup withholding rules are applicable to payments made before January 1,
1999.
The backup withholding rules require a payor to deduct and withhold a tax
if (i) the payee fails to furnish a taxpayer identification number ("TIN") in
the prescribed manner, (ii) the IRS notifies the payor that the TIN furnished by
the payee is incorrect, (iii) the payee has failed to report properly the
receipt of "reportable payments" and the IRS has notified the payor that
withholding is required, or (iv) the payee fails to certify under the penalty of
perjury that such payee is not subject to backup withholding. If any one of the
events discussed above occurs with respect to a holder of Exchange Notes, the
Company, its paying agent or other withholding agent will be required to
withhold a tax equal to 31% of any "reportable payment" made in connection with
the Exchange Notes of such holder. A "reportable payment" includes, among other
things, amounts paid in respect of interest or original issue discount on an
Exchange Note. Any amounts withheld from a payment to a holder under the backup
withholding rules will be allowed as a refund or credit against such holder's
federal income tax, provided that the required information is furnished to the
IRS. Certain holders (including, among others, corporations and certain
tax-exempt organizations) are not subject to backup withholding.
CERTAIN U.S. FEDERAL INCOME TAX CONSEQUENCES FOR NON-U.S. HOLDERS
This section discusses special rules applicable to a Non-U.S. Holder of
Exchange Notes. This summary does not address the tax consequences to
stockholders, partners or beneficiaries in a Non-U.S. Holder or the tax
consequences to Non-U.S. Holders that are subject to United States federal
income tax on a net basis on income with respect to an Exchange Note because
such income is effectively connected with the conduct of a U.S. trade or
business. For purposes hereof, a "Non-U.S. Holder" is any person that is not a
U.S. Holder.
Interest. Interest that is paid to a Non-U.S. Holder on an Exchange Note
will not be subject to U.S. income or withholding tax if the interest qualified
as "portfolio interest." Generally, interest on the Exchange Notes that is paid
by the Company will qualify as portfolio interest if (i) the Non-U.S. Holder
does not own,
73
<PAGE> 78
actually or constructively, 10% or more of the total combined voting power of
all classes of stock of the Company entitled to vote, (ii) the Non-U.S. Holder
is not a controlled foreign corporation that is related to the Company actually
or constructively through stock ownership for U.S. federal income tax purposes,
(iii) the Non-U.S. Holder is not a bank receiving interest on a loan entered
into in the ordinary course of business, and (iv) either (x) the beneficial
owner of the Exchange Note provides the Company or its paying agent with a
properly executed certification on IRS Form W-8 (or a suitable substitute form)
signed under penalties of perjury that the beneficial owner is not a "U.S.
person" for U.S. federal income tax purposes and that provides the beneficial
owner's name and address, or (y) a securities clearing organization, bank or
other financial institution that holds customers' securities in the ordinary
course of its business holds the Exchange Note and certifies to the Company or
its agent under penalties of perjury that the IRS Form W-8 (or a suitable
substitute) has been received by it from the beneficial owner of the Exchange
Note or a qualifying intermediary and furnishes the payor a copy thereof.
Payments of interest to a Non-U.S. Holder that do not qualify for the
portfolio interest exception discussed above will be subject to withholding of
U.S. federal income tax at a rate of 30% unless a U.S. income tax treaty applies
to reduce the rate of withholding. To claim a treaty reduced rate, the Non-U.S.
Holder must provide a properly executed Form 1001.
Sale, Exchange or Retirement of Exchange Notes. Any gain realized by a
Non-U.S. Holder on the sale, exchange or retirement of the Exchange Notes, will
generally not be subject to U.S. federal income tax or withholding unless (i)
the Non-U.S. Holder is an individual who was present in the U.S. for 183 days or
more in the taxable year of the disposition and meets certain other
requirements, or (ii) the Non-U.S. Holder is subject to tax pursuant to certain
provisions of the Code applicable to certain individuals who renounce their U.S.
citizenship or terminate long-term U.S. residency. If a Non-U.S. Holder falls
under (i) above, the holder generally will be subject to U.S. federal income tax
at a rate of 30% on the gain derived from the sale (or reduced treaty rate) and
may be subject to withholding in certain circumstances. If a Non-U.S. Holder
falls under (ii) above, the holder will be taxed on the net gain derived from
the sale under the graduated U.S. federal income tax rates that are applicable
to U.S. citizens, resident aliens, and domestic corporations, as the case may
be, and may be subject to withholding under certain circumstances.
U.S. Information Reporting and Backup Withholding Tax. Back-up withholding
and information reporting generally will not apply to an Exchange Note issued in
registered form that is beneficially owned by a Non-U.S. Holder if the
certification of Non-U.S. Holder status is provided to the Company or its agent
as described above in " -- Certain Federal Income Tax Consequences to Non-U.S.
Holders -- Interest," provided that the payor does not have actual knowledge
that the holder is a U.S. person. The Company may be required to report annually
on Form 1042-S to the IRS and to each Non-U.S. Holder the amount of interest
paid to, and the tax withheld, if any, with respect to each Non-U.S. Holder.
If payments of principal and interest are made to the beneficial owner of
an Exchange Note by or through the foreign office of a custodian, nominee or
other agent of such beneficial owner, or if the proceeds of the sale of Exchange
Notes are made to the beneficial owner of an Exchange Note through a foreign
office of a "broker" (as defined in the pertinent Treasury Regulations), the
proceeds will not be subject to backup withholding (absent actual knowledge that
the payee is a U.S. person). Information reporting (but not backup withholding)
will apply, however, to a payment by a foreign office of a custodian, nominee,
agent or broker that is (i) a U.S. person, (ii) a controlled foreign corporation
for U.S. federal income tax purposes, or (iii) derives 50% or more of its gross
income from the conduct of a U.S. trade or business for a specified three-year
period; unless the broker has in its records documentary evidence that the
holder is not a Non-U.S. Holder and certain conditions are met (including that
the broker has no actual knowledge that the holder is a U.S. Holder) or the
holder otherwise establishes an exemption. Payment through the U.S. office of a
custodian, nominee, agent or broker is subject to both backup withholding at a
rate of 31% and information reporting, unless the holder certifies that it is a
Non-U.S. Holder under penalties of perjury or otherwise establishes an
exemption. Any amount withheld under the backup withholding rules from a payment
to a Non-U.S. Holder will be allowed as a credit against, or refund of, such
holder's U.S. federal income tax liability, provided that certain information is
provided by the holder to the IRS.
74
<PAGE> 79
The IRS released Treasury Regulations in October 1997 that revise the
procedures for withholding tax, and the associated backup withholding and
information reporting rules described above for payments of interest and gross
proceeds made after December 31, 1998. By Notice 98-16, the IRS delayed
effectiveness of these regulations to payments made after December 31, 1999. The
regulations modify the requirements imposed on a Non-U.S. Holder or certain
intermediaries for establishing the recipient's status as a Non-U.S. Holder
eligible for exemption from withholding and backup withholding. In particular,
the regulations impose more stringent conditions on the ability of financial
intermediaries acting for a Non-U.S. Holder to provide certifications on behalf
of the Non-U.S. Holder, which may include entering into an agreement with the
IRS to audit certain documentation with respect to such certifications. Non-U.S.
Holders should consult their tax advisors to determine how the regulations will
affect their particular circumstances.
PLAN OF DISTRIBUTION
Each broker-dealer that receives Exchange Notes for its own account
pursuant to the Exchange Offer must acknowledge that it will deliver a
prospectus in connection with any resale of such Exchange Notes. This
Prospectus, as it may be amended or supplemented from time to time, may be used
by a broker-dealer in connection with resales of Exchange Notes received in
exchange for Original Notes where such Original Notes were acquired as a result
of market-making activities or other trading activities. The Company has agreed
that, starting on the Expiration Date and ending on the close of business on the
ninetieth day after the Expiration Date, it will make this Prospectus, as
amended or supplemented, available to any broker-dealer for use in connection
with any such resale. In addition, until , 1998, all dealers
effecting transactions in the Exchange Notes may be required to deliver a
prospectus.
The Company will not receive any proceeds from any sale of Exchange Notes
by broker-dealers. Exchange Notes received by broker-dealers for their own
account pursuant to the Exchange Offer may be sold from time to time in one or
more transactions in the over-the-counter market, in negotiated transactions,
through the writing of options on the Exchange Notes or a combination of such
methods of resale, at market prices prevailing at the time of resale, at prices
related to such prevailing market prices or negotiated prices. Any such resale
may be made directly to purchasers or to or through brokers or dealers who may
receive compensation in the form of commissions or concessions from any such
broker-dealer and/or the purchasers of any such Exchange Notes. Any
broker-dealer that resells Exchange Notes that were received by it for its own
account pursuant to the Exchange Offer and any broker or dealer that
participates in a distribution of such Exchange Notes may be deemed to be an
"underwriter" within the meaning of the Securities Act and any profit of any
such resale of Exchange Notes and any commissions or concessions received by any
such persons may be deemed to be underwriting compensation under the Securities
Act. The Letter of Transmittal states that by acknowledging that it will deliver
and by delivering a prospectus, a broker-dealer will not be deemed to admit that
it is an "underwriter" within the meaning of the Securities Act.
For a period of 90 days after the Expiration Date, the Company will
promptly send additional copies of this Prospectus and any amendment or
supplement to this Prospectus to any broker-dealer that requests such documents
in the Letter of Transmittal. The Company has agreed to pay all expenses
incident to the
75
<PAGE> 80
Exchange Offer (including the expenses of one counsel for the Holders of the
Notes) other than commissions or concessions of any broker or dealers and will
indemnify the Holders of the Notes (including any broker-dealer) against certain
liabilities, including liabilities under the Securities Act.
LEGAL MATTERS
Certain legal matters in connection with the Exchange Notes offered hereby
are being passed upon for the Company by Wellesley Law Associates, Wellesley
Hills, Massachusetts, and Edwards & Angell, LLP, Providence, Rhode Island,
counsel for the Company.
EXPERTS
The audited consolidated financial statements of Simonds Industries Inc.
and its subsidiaries as of December 28, 1996 and December 27, 1997, and for the
five months ended May 26, 1995 and seven months ended December 30, 1995 and the
years ended December 28, 1996 and December 27, 1997 included in this
registration statement have been audited by Arthur Andersen LLP, independent
public accountants, as indicated in their report with respect thereto and are
included herein in reliance upon the authority of said firm as experts in giving
said reports.
76
<PAGE> 81
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
PAGE
----
Report of Independent Public Accountants.................................. F-2
Consolidated Balance Sheets as of December 28, 1996, December 27, 1997
and June 27, 1998 (unaudited)........................................... F-3
Consolidated Statements of Operations for each of the periods -- Five
Months ended May 26, 1995, Seven Months ended December 30, 1995, Years
ended December 28, 1996 and December 27, 1997, and the Six Months ended
June 28, 1997 (unaudited) and June 27, 1998 (unaudited)................. F-4
Consolidated Statements of Cash Flows for each of the periods -- Five
Months ended May 26, 1995, Seven Months ended December 30, 1995, Years
ended December 28, 1996 and December 27, 1997, and the Six Months
ended June 28, 1997 (unaudited) and June 27, 1998 (unaudited)........... F-5
Consolidated Statements of Shareholders' Equity for each of the periods
-- Five Months ended May 26, 1995, Seven Months ended December 30,
1995, Fiscal Years ended December 28, 1996 and December 27, 1997, and
the Six Months ended June 27, 1998 (unaudited).......................... F-6
Notes to Consolidated Financial Statements................................ F-7
F-1
<PAGE> 82
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and Shareholders of
Simonds Industries Inc:
We have audited the consolidated balance sheets of Simonds Industries Inc.
(the Company), formerly known as SI Holding Corporation, as of December 28, 1996
and December 27, 1997, and the related consolidated statements of operations,
shareholders' equity and cash flows for the seven months ended December 30,
1995, and each of the two years ended December 27, 1997. We have also audited
the consolidated statements of operations, shareholders' equity and cash flows
of Simonds Industries Inc. (Predecessor Company) for the five months ended May
26, 1995. These consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
Simonds Industries Inc. at December 28, 1996 and December 27, 1997, and the
consolidated results of its operations and cash flows for the seven months ended
December 30, 1995, and each of the two years ended December 27, 1997, and the
consolidated results of operations and cash flows of the Predecessor Company for
the five months ended May 26, 1995, in conformity with generally accepted
accounting principles.
ARTHUR ANDERSEN LLP
Boston, Massachusetts
June 11, 1998
F-2
<PAGE> 83
SIMONDS INDUSTRIES INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
FISCAL YEARS ENDED
------------------ JUNE 27,
1996 1997 1998
------- ------- -----------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash...................................................... $ 1,255 $ 1,255 $ 835
Accounts receivable, net of reserves of $798,
$806 and $866........................................... 14,113 16,185 18,842
Inventories............................................... 23,235 22,576 28,697
Other current assets...................................... 3,260 3,160 3,467
Refundable income taxes................................... 141 101 101
------- ------- --------
Total current assets................................ 42,004 43,277 51,942
PROPERTY, PLANT AND EQUIPMENT:
Land...................................................... 2,029 2,324 2,315
Buildings and improvements................................ 9,669 10,557 11,747
Machinery and equipment................................... 15,283 21,735 23,658
Construction-in-progress.................................. 1,675 348 1,891
------- ------- --------
28,656 34,964 39,611
Less -- Accumulated depreciation.......................... 2,999 5,308 6,655
------- ------- --------
Net property, plant and equipment..................... 25,657 29,656 32,956
OTHER ASSETS:
Goodwill, net of accumulated amortization of
$537, $1,026 and $1,152................................. 13,714 20,613 22,065
Deferred financing costs, net of accumulated
amortization of $553, $909 and $988..................... 1,099 880 722
Other..................................................... 146 917 909
------- ------- --------
Total other assets.................................. 14,959 22,410 23,696
------- ------- --------
Total assets........................................ $82,620 $95,343 $108,594
======= ======= ========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Overdraft facilities...................................... $ 788 $ 249 $ 150
Notes payable............................................. 2,390 1,481 5,802
Current portion of long-term debt......................... 4,197 4,925 5,255
Accounts payable.......................................... 4,930 4,797 6,578
Accrued payroll and employee benefits..................... 3,287 4,827 3,693
Other accrued liabilities................................. 1,445 2,691 4,088
Currently deferred income taxes........................... 2,758 2,656 2,650
------- ------- --------
Total current liabilities........................... 19,795 21,626 28,216
LONG-TERM DEBT, net of current portion...................... 39,588 45,286 48,825
DEFERRED INCOME TAXES....................................... 3,320 4,321 4,386
ACCRUED PENSION LIABILITY................................... 1,735 1,550 1,530
OTHER NONCURRENT LIABILITIES................................ 984 945 933
COMMITMENTS AND CONTINGENCIES (NOTE 7)...................... -- -- --
SHAREHOLDERS' EQUITY:
Common stock, $.01 par value -- Authorized -- 200,000
shares Issued and outstanding -- 148,037,
148,371 and 148,371..................................... 1 1 1
Capital in excess of par value............................ 10,520 10,553 10,553
Retained earnings......................................... 6,858 11,859 15,173
Cumulative translation adjustment......................... (181) (798) (976)
Treasury stock, at cost................................... (47)
------- ------- --------
Total shareholders' equity.......................... 17,198 21,615 24,704
------- ------- --------
Total liabilities and shareholders' equity.......... $82,620 $95,343 $108,594
======= ======= ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-3
<PAGE> 84
SIMONDS INDUSTRIES INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS)
<TABLE>
<CAPTION>
PREDECESSOR THE COMPANY
----------- ----------------------------------------------------------------
SIX MONTHS
5 MONTHS 7 MONTHS YEAR YEAR -------------------
ENDED ENDED ENDED ENDED ENDED ENDED
MAY 26, DECEMBER 30, DECEMBER 28, DECEMBER 27, JUNE 28, JUNE 27,
1995 1995 1996 1997 1997 1998
----------- ------------ ------------ ------------ -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
Net sales....................... $42,212 $58,932 $98,661 $114,182 $55,376 $62,641
Cost of goods sold.............. 30,102 41,353 69,828 78,798 38,247 42,281
------- ------- ------- -------- ------- -------
Gross profit.......... 12,110 17,579 28,833 35,384 17,129 20,360
Selling, general and
administrative expense........ 15,338 10,176 17,135 21,149 9,944 11,961
------- ------- ------- -------- ------- -------
Operating income
(loss).............. (3,228) 7,403 11,698 14,235 7,185 8,399
Other expenses (income):
Interest expense.............. 650 2,880 4,399 4,963 2,394 2,477
Other, net.................... (276) (208) 245 520 172 167
------- ------- ------- -------- ------- -------
Income (loss) before
income taxes........ (3,602) 4,731 7,054 8,752 4,619 5,755
Provision (benefit) for income
taxes......................... (1,387) 1,856 3,071 3,751 1,971 2,441
------- ------- ------- -------- ------- -------
Net income (loss)..... $(2,215) $ 2,875 $ 3,983 $ 5,001 $ 2,648 $ 3,314
======= ======= ======= ======== ======= =======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-4
<PAGE> 85
SIMONDS INDUSTRIES INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
PREDECESSOR THE COMPANY
----------- ----------------------------------------------------------------
SIX MONTHS
FIVE MONTHS SEVEN MONTHS YEAR YEAR -------------------
ENDED ENDED ENDED ENDED ENDED ENDED
MAY 26, DECEMBER 30, DECEMBER 28, DECEMBER 27, JUNE 28, JUNE 27,
1995 1995 1996 1997 1997 1998
----------- ------------ ------------ ------------ -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
CASH FLOW FROM OPERATING ACTIVITIES:
Net income (loss).............................. $(2,215) $ 2,875 $ 3,983 $ 5,001 $ 2,648 $ 3,314
Adjustment to reconcile net income (loss) to
net cash provided by operating activities:
Depreciation and amortization................ 1,498 1,500 2,712 3,459 1,552 2,023
Bonus paid in common stock................... 1,449 -- -- -- -- --
Gain on asset sales.......................... (41) (9) (11) (16) (5) (33)
Provision (benefit) for deferred income
taxes...................................... (104) 1,612 1,322 258 990 754
Changes in assets and liabilities, net of
acquisitions:
Accounts receivable........................ (878) 1,560 (350) (927) (1,221) 100
Inventories................................ (3,088) 3,030 686 2,902 (145) (2,423)
Income tax refunds receivable.............. -- -- -- 40 40 --
Other current and non-current assets....... (2,329) 2,104 (818) 602 298 (134)
Accounts payable........................... 1,793 (1,711) 168 (346) 284 150
Accrued expenses........................... 5,396 (4,743) (979) 2,297 717 (1,019)
Other non-current liabilities.............. (28) (574) (48) (224) (182) (32)
------- -------- ------- -------- ------- -------
Net cash provided by operating activities.... 1,453 5,644 6,665 13,046 4,976 2,700
------- -------- ------- -------- ------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of property and equipment... 45 22 35 107 38 57
Purchases of equipment......................... (745) (1,895) (3,638) (3,708) (1,542) (2,085)
Acquisition of Simonds, net of cash acquired... -- (44,620) -- -- -- --
Acquisition of Pacific Hoe Company assets...... -- -- -- (5,578) (5,578) --
Acquisition of Strongridge Limited............. -- -- (1,185) -- -- --
Acquisition of Armstrong Manufacturing, net of
cash acquired................................ -- -- -- (8,125) -- --
Acquisition of W. Notting Ltd., net of cash
$51.......................................... -- -- -- -- -- (6,781)
------- -------- ------- -------- ------- -------
Net cash used by investing activities........ (700) (46,493) (4,788) (17,304) (7,082) (8,809)
------- -------- ------- -------- ------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net change in overdrafts....................... 149 124 319 (539) (290) (99)
Net proceeds under revolving credit............ (247) 5,053 (197) (1,445) (585) 6,802
Proceeds from issuance of long-term debt....... -- 35,800 -- 7,700 6,000 --
Principal payments of long-term debt........... (1,132) (8,777) (2,530) (1,312) (3,362) (2,316)
Proceeds from issuance of notes payable........ -- -- -- -- -- 1,474
Issuance of common stock....................... -- 11,000 -- 33 33 --
Fees paid for debt financing................... -- (1,534) (118) (138) (32) --
Expenses of capitalization..................... -- (63) -- -- -- --
Purchase of treasury stock..................... -- -- -- -- -- (47)
------- -------- ------- -------- ------- -------
Net cash (used in) provided by financing
activities................................. (1,230) 41,603 (2,526) 4,299 1,764 5,814
------- -------- ------- -------- ------- -------
EFFECT OF EXCHANGE RATE.......................... (189) 8 360 (41) (33) (125)
------- -------- ------- -------- ------- -------
NET INCREASE (DECREASE) IN CASH.................. (666) 762 (289) -- (375) (420)
CASH AT BEGINNING OF PERIOD...................... 1,448 782 1,544 1,255 1,255 1,255
------- -------- ------- -------- ------- -------
CASH AT END OF PERIOD............................ $ 782 $ 1,544 $ 1,255 $ 1,255 $ 880 $ 835
======= ======== ======= ======== ======= =======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-5
<PAGE> 86
SIMONDS INDUSTRIES INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
CAPITAL IN CUMULATIVE TOTAL
COMMON COMMON EXCESS RETAINED TRANSLATION TREASURY SHAREHOLDERS' COMPREHENSIVE
SHARES STOCK OF PAR VALUE EARNINGS ADJUSTMENT STOCK EQUITY INCOME(LOSS)
--------- ------ ------------ -------- ----------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
SIMONDS INDUSTRIES INC.
(Predecessor)
Balance at December 31,
1994.................... 3,461,777 $35 $ 6,574 $19,267 $(651) $ (239) $24,986 $ --
Net loss................ -- -- -- (2,215) -- -- (2,215) (2,215)
Foreign currency
translation
adjustment............ -- -- -- -- 386 -- 386 386
Stock bonus............. 125,732 2 1,447 -- -- -- 1,449 --
--------- --- ------- ------- ----- ------- ------- -------
Balance at May 26, 1995... 3,587,509 $37 $ 8,021 $17,052 $(265) $ (239) $24,606 $(1,829)
========= === ======= ======= ===== ======= ======= =======
SIMONDS INDUSTRIES INC.
Balance at May 26, 1995... -- $-- $ -- $ -- $ -- $ -- $ -- $ --
Issuance of common stock
for cash.............. 110,000 1 10,999 -- -- -- 11,000 --
Issuance of common stock
in exchange for stock
of Predecessor........ 38,037 -- 1,252 -- -- -- 1,252 --
Cash distribution to
shareholders.......... -- -- (2,001) -- -- -- (2,001) --
Issuance of common stock
warrants.............. -- -- 270 -- -- -- 270 --
Net income.............. -- -- -- 2,875 -- -- 2,875 2,875
Foreign currency
translation
adjustment............ -- -- -- -- (211) -- (211) (211)
--------- --- ------- ------- ----- ------- ------- -------
Balance at December 30,
1995.................... 148,037 1 10,520 2,875 (211) -- 13,185 2,664
=======
Net income.............. -- -- -- 3,983 -- -- 3,983 3,983
Foreign currency
translation
adjustment............ -- -- -- -- 30 -- 30 30
--------- --- ------- ------- ----- ------- ------- -------
Balance at December 28,
1996.................... 148,037 1 10,520 6,858 (181) -- 17,198 4,013
=======
Net income.............. -- -- -- 5,001 -- -- 5,001 5,001
Foreign currency
translation
adjustment............ -- -- -- -- (617) -- (617) (617)
Stock options
exercised............. 334 -- 33 -- -- -- 33 --
--------- --- ------- ------- ----- ------- ------- -------
Balance at December 27,
1997.................... 148,371 1 10,553 11,859 (798) -- 21,615 4,384
=======
Net income.............. -- -- -- 3,314 -- -- 3,314 3,314
Foreign currency
translation
adjustment............ -- -- -- -- (178) -- (178) (178)
Acquisition of treasury
stock................. -- -- -- -- -- (47) (47) --
--------- --- ------- ------- ----- ------- ------- -------
Balance at June 27, 1998
(unaudited)............. 148,371 $ 1 $10,553 $15,173 $(976)) $ (47) $24,704 $ 3,136
========= === ======= ======= ===== ======= ======= =======
</TABLE>
Comprehensive income for the six months ended June 28, 1997 was $2,139.
The accompanying notes are an integral part of these consolidated financial
statements.
F-6
<PAGE> 87
SIMONDS INDUSTRIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS
EXCEPT PER SHARE AMOUNTS)
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Effective June 11, 1998, SI Holding Corporation changed its name to Simonds
Industries Inc., and merged with its wholly owned operating subsidiary. Simonds
Industries Inc. (Simonds or the Company), a Delaware corporation, manufactures
and is a worldwide distributor of industrial cutting tools. The primary products
manufactured by Simonds include metal band and wood saws, industrial knives and
rule, files and band saw equipment. Simonds' principal manufacturing operations
are located in Fitchburg, Massachusetts; Newcomerstown, Ohio; Big Rapids,
Michigan; Portland and Springfield, Oregon; and Spangenberg, Germany. Simonds
also has sales subsidiaries in the United Kingdom and Canada.
(a) Principles of Consolidation
The accompanying consolidated financial statements include the accounts of
Simonds Industries Inc. and its subsidiaries. All material intercompany
transactions and balances have been eliminated in consolidation.
(b) Disclosures About Fair Value of Financial Instruments
The carrying amounts of cash, accounts receivable and accounts payable
approximate fair value because of their short-term nature. The fair value of
long-term indebtedness approximate the amount on the Company's consolidated
balance sheets because the vast majority of the debt has variable interest
rates.
(c) Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting periods. Actual results could differ from those estimates.
(d) Fiscal Year
The Company's fiscal year ends on the Saturday closest to December 31. As a
result, the fiscal period for the five months ended May 26, 1995, seven months
ended December 30, 1995, and years ended December 28, 1996 and December 27, 1995
include 21, 31, 52, and 52 weeks, respectively. The six months ended June 28,
1997 and June 27, 1998 each include 26 weeks.
(e) Inventories
Approximately 67% and 62% of inventories at December 28, 1996 and December
27, 1997, respectively, are valued at the lower of cost (last-in, first-out
(LIFO) method) or market. All other inventories are valued at the lower of cost
(first-in, first-out (FIFO) method) or market. Inventory costs include labor and
manufacturing overhead.
F-7
<PAGE> 88
SIMONDS INDUSTRIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(f) Property, Plant and Equipment
Depreciation is computed using the straight-line method based on the
following estimated useful lives:
<TABLE>
<CAPTION>
ESTIMATED
USEFUL LIVES
------------
<S> <C>
Buildings and improvements.................................. 20-40 years
Machinery and equipment..................................... 3-12 years
Furniture and fixtures...................................... 8 years
</TABLE>
Maintenance and repairs are expensed as incurred.
(g) Goodwill
Goodwill represents the cost in excess of fair value of the net assets of
companies acquired in purchase transactions. Goodwill is being amortized on a
straight-line method over 40 years. Amortization charged to operations amounted
to $10, $202, $335 and $489 for the five months ended May 26, 1995, seven months
ended December 30, 1995, and fiscal years ended 1996 and 1997, respectively. At
each balance sheet date, the Company evaluated the realizability of goodwill
based on expectations of non-discounted cash flows and operating income for each
subsidiary having a material goodwill balance. Based on its most recent
analysis, the Company believes that no material impairment of goodwill exists at
December 27, 1997.
(h) Foreign Currency Translation
The assets and liabilities of the Company's foreign subsidiaries are
translated at year-end rates of exchange, and statement of operations accounts
are translated at weighted average rates of exchange. The resulting translation
adjustments are excluded from net income and are accumulated as a separate
component of shareholders' equity. Foreign currency transaction gains and losses
are included in income or expense in the period in which the transaction occurs.
The effect of foreign currency transaction gains or losses included in the
determination of results for the periods ended May 26, 1995, December 30, 1995,
December 28, 1996 and December 27, 1997 have not been material.
(i) Sales Recognition
The Company recognizes sales upon the shipment of its products net of
applicable provisions for discounts and allowances.
(j) Income Taxes
The Company accounts for its income taxes under the provisions of Statement
of Financial Accounting Standards (SFAS) No. 109, Accounting for Income Taxes.
SFAS No. 109 utilizes the liability method, and deferred taxes are determined
based on the estimated future tax effects of differences between the financial
statement and tax bases of assets and liabilities at currently enacted tax laws
and rates.
(k) Recent Accounting Pronouncements
In June 1997, the Financial Accounting Standards Board (FASB) issued No.
131, Disclosures About Segments of an Enterprise and Related Information which
will be effective for the Company's financial statements for the 1998 fiscal
year. This statement established standards for reporting information about
segments in annual and interim financial statements. This statement introduces a
new model for segment reporting, called the "management approach." The
management approach is based on the way the chief
F-8
<PAGE> 89
SIMONDS INDUSTRIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
operating decision-maker organizes segments within a company for making
operating decisions and assessing performance. Reportable segments are based on
products and services, geography, legal structure and management structure.
(2) ORGANIZATION AND ACQUISITIONS
In May 1995, Fleet Equity Partners VI, L.P., Fleet Venture Resources, Inc.,
and other affiliated entities (Fleet) and certain officers of Simonds Industries
Inc. (Predecessor) formed SI Holding Corporation for the purpose of acquiring
100% of the Predecessor's outstanding stock and warrants. The Company received
cash proceeds through the issuance of 110,000 shares of common stock to Fleet of
$11,000 and debt proceeds amounting to $46,033 (see Note 6). In addition, as
discussed below, certain members of management exchanged $3,803 aggregate fair
value of options and stock awards for 38,037 shares of the Company's common
stock. In connection therewith, the Company incurred $63 of organizational
costs, which are being amortized over a five-year period, and approximately
$1,534 in professional fees related to the debt financing, which are being
amortized over the lives of the underlying respective debt agreements using the
effective interest rate method. These amounts are included in other assets in
the accompanying consolidated balance sheets, net of accumulated amortization at
December 28, 1996 and December 27, 1997 of approximately $20 and $33,
respectively, for the organizational costs and $553 and $909, respectively, for
the debt financing costs.
On May 26, 1995, the Company purchased the outstanding common stock and
warrants of the Predecessor for $44,620, including acquisition expenses of $436.
Of this amount, $3,250 was placed into an escrow account to satisfy certain
environmental and other contingent liabilities in accordance with the escrow
agreement.
Prior to the acquisition, the Predecessor granted stock awards with a fair
value of approximately $1,449 to certain officers and purchased the
Predecessor's outstanding stock options for $2,354, representing the difference
between the fair value of the underlying stock and the exercise price of the
options. In connection with the acquisition, the officers exchanged the $3,803
aggregate fair value of these awards and option payments for 38,037 shares of
the Company's common stock. The exchange was recorded at $1,252, an amount equal
to the officers' basis in the Predecessor prior to the acquisition (i.e., the
carryover basis). Cash of $2,001 paid to these officers to purchase other shares
of the Predecessor's stock held by them was recorded as a cash distribution to
shareholders. The transactions and the acquisition were accounted for as a
purchase in accordance with the provisions of Accounting Principles Board (APB)
Opinion No. 16, Business Combinations, and Emerging Issues Task Force Issue No.
88-16, Basis in Leveraged Buyout Transactions.
The stock awards and purchase of stock options discussed in the preceding
paragraph resulted in a compensation charge to the Predecessor's selling,
general and administrative expense of $3,803 for the 5 months ended May 26,
1995. The Predecessor also accrued additional compensation costs of $4,117 for
the five months ended May 26, 1995 representing certain bonuses to the
Predecessor's management and the buyout of stock options held by management that
terminated employment on the closing date. Accordingly, the Predecessor's
selling, general and administrative expense includes approximately $7,920 of
unusual compensation costs.
For financial reporting purposes, the purchase price was allocated to
assets acquired and liabilities assumed based on the fair market value at the
date of acquisition, except for the portion of assets and liabilities in which
ownership in the Company was retained by the Predecessor's management. This
portion was recorded using Simonds' predecessor/carryover basis. The excess of
purchase price over fair market value of net assets acquired (as adjusted for
the predecessor basis) is reflected in the accompanying consolidated balance
sheets as goodwill.
For income tax purposes, the transaction was treated as an acquisition of
stock. As a result, the tax bases of assets and liabilities carry over from
amounts previously reported for income tax purposes. Deferred taxes
F-9
<PAGE> 90
SIMONDS INDUSTRIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
have been provided in the accompanying consolidated balance sheets for the
temporary differences between the tax and financial reporting bases of the
assets acquired and liabilities assumed.
On October 1, 1996, the Company's wholly owned Canadian subsidiary acquired
100% of the outstanding stock of Strongridge Limited (a Canadian company) for
approximately $1,185. The acquisition has been accounted for as a purchase, with
the purchase price in excess of the fair value of net assets acquired, $932,
being amortized on a straight-line basis over 40 years. Results of operations of
Strongridge Limited are included in the accompanying consolidated financial
statements subsequent to October 1, 1996.
On January 27, 1997, the Company purchased certain assets, mainly inventory
and equipment, for $5,578 from Pacific Hoe Company. Purchase price in excess of
fair value of assets acquired, $3,831, is being amortized on a straight-line
basis over 40 years.
On August 1, 1997, the Company acquired 100% of the outstanding stock of
Armstrong Manufacturing Company (Armstrong) for $9,000, which includes cash
acquired of $875. The acquisition has been accounted for as a purchase, with the
purchase price in excess of the fair value of net assets acquired, $3,601, being
amortized on a straight-line basis over 40 years. To fund the acquisition, the
Company amended its credit agreement with Heller Financial Inc. (Note 6).
Results of operations of Armstrong are included in the accompanying consolidated
financial statements subsequent to August 1, 1997.
Pro forma results for 1996 and 1997 have not been reported because they
would not be materially different from the financial statements presented.
(3) INVENTORIES
Inventories at December 28, 1996 and December 27, 1997 were as follows:
<TABLE>
<CAPTION>
1996 1997
------- -------
<S> <C> <C>
Raw materials............................................ $ 4,526 $ 4,176
Work-in-process.......................................... 6,108 6,740
Finished goods........................................... 12,601 11,660
------- -------
Total inventories.............................. $23,235 $22,576
======= =======
</TABLE>
U.S. inventories of $15,497 and $14,190 at December 28, 1996 and December
27, 1997, respectively, were valued using the LIFO method. The replacement cost
of these inventories would have been higher by approximately $1,053 and $704 in
1996 and 1997, respectively.
(4) WARRANTS
In connection with the 1995 issuance of a $3,300 secured subordinated note
(see Note 6), the Company issued warrants to purchase, for $46.56 per share,
5,052 shares of the Company's common stock. The difference between the $100 fair
value per common share at the grant date and the exercise price has been
credited to capital in excess of par value.
(5) RETIREMENT PLANS
The Company has a combined defined-contribution profit sharing and 401(k)
retirement plan covering all domestic salaried and certain hourly employees.
Contributions to the profit sharing plan are determined by the Board of
Directors. The profit sharing cost of this plan was approximately $157, $231,
$390 and $399 for the five months ended May 26, 1995, seven months ended
December 30, 1995, and fiscal years ended December 28, 1996 and December 27,
1997, respectively. In the 401(k) portion of the plan, the Company matches at a
rate of 50% on the first 6% of an employee's salary contribution. Company 401(k)
matching
F-10
<PAGE> 91
SIMONDS INDUSTRIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
contributions amounted to approximately $141, $183, $283 and $302 for the five
months ended May 26, 1995, seven months ended December 30, 1995, and fiscal
years ended December 28, 1996 and December 27, 1997, respectively.
Certain of the Company's hourly employees participate in a union-sponsored,
multiemployer defined-benefit retirement plan. The cost of this plan was
approximately $151, $213, $378 and $392 for the five months ended May 26, 1995,
seven months ended December 30, 1995, and fiscal years ended December 28, 1996
and December 27, 1997, respectively. Contributions are based on wages earned and
are paid monthly to the pension administrator.
All other domestic hourly employees are covered by a defined-contribution
plan. Contributions are based on a union contract as a percentage of wages
earned and are paid annually. The cost of this plan was approximately $52, $85,
$140 and $151 for the five months ended May 26, 1995, seven months ended
December 30, 1995, and fiscal years ended December 28, 1996 and December 27,
1997, respectively.
In connection with the acquisition of Armstrong, the Company acquired a
defined benefit plan to cover all employees of Armstrong. The defined benefit
plan was frozen as of December 27, 1997. The fair value of plan assets exceeded
the projected benefit obligation for services rendered as of December 27, 1997.
The plan officially will terminate in 1998, at which time all plan assets will
be fully distributed to plan participants. All Participants of this plan were
eligible to participate in the Company's 401(k) retirement plan, effective
January 1, 1998 and based on eligibility, as defined.
In addition to the defined benefit plan, employees of Armstrong are also
covered under a profit sharing plan. The plan merged with the Company's 401(k)
retirement plan effective January 1, 1998. Contributions to the Armstrong profit
sharing plan are determined by the Board of Directors. The profit sharing cost
of this plan was approximately $260 in 1997.
Certain foreign employees are covered under defined-contribution plans.
Total costs for these plans amounted to approximately $53, $88, $136 and $148
for the five months ended May 26, 1995, seven months ended December 30, 1995,
and fiscal years ended December 28, 1996 and December 27, 1997, respectively.
Certain employees of one of Simonds' subsidiaries, Wespa
Metallsagenfabrik -- Simonds Industries GmbH (Wespa), are covered by an unfunded
defined-benefit plan. The following table sets forth the plan's funded status
and the amount recognized in the Company's accompanying consolidated balance
sheets at December 28, 1996 and December 27, 1997:
<TABLE>
<CAPTION>
1996 1997
------ ------
<S> <C> <C>
Actuarial present value of accumulated plan benefits --
Vested................................................... $1,430 $1,259
Nonvested................................................ 26 4
------ ------
Accumulated benefit obligation................... 1,456 1,263
Effect of projected future compensation increases.......... 280 287
------ ------
Projected benefit obligation for service
rendered to date............................... 1,736 1,550
------ ------
Plan assets at fair value.................................. -- --
------ ------
Accrued pension liability........................ $1,736 $1,550
====== ======
</TABLE>
F-11
<PAGE> 92
SIMONDS INDUSTRIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Net periodic pension expense for the year ended December 28, 1996 and
December 27, 1997 includes the following components:
<TABLE>
<CAPTION>
PREDECESSOR THE COMPANY
----------- --------------------------------------------
5 MONTHS 7 MONTHS YEAR YEAR
ENDED ENDED ENDED ENDED
MAY 26, DECEMBER 30, DECEMBER 28, DECEMBER 27,
1995 1995 1996 1997
----------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
Service costs (benefits earned
during the period)............... $12 $16 $ 23 $ 18
Interest cost on projected benefit
obligation....................... 53 74 102 84
--- --- ---- ----
Net periodic pension
expense..................... $65 $90 $125 $102
=== === ==== ====
</TABLE>
The discount rate and rate of increase in future compensation levels used
in determining the projected benefit obligation were 7.0% and 4.0%,
respectively, for the five months ended May 26, 1995 and seven months ended
December 30, 1995. The discount rate and rate of increase used for the years
ended December 28, 1996 and December 27, 1997, were 7.0% and 6.5%, respectively.
(6) DEBT
Debt consists of the following at December 28, 1996 and December 27, 1997:
<TABLE>
<CAPTION>
1996 1997
------- -------
<S> <C> <C>
Revolving credit facility loan......................... $10,743 $12,945
Term notes payable..................................... 28,600 33,375
Line-of-credit facility for German subsidiary.......... 2,390 1,481
Term loan payable by German subsidiary................. 1,351 761
Subordinated notes payable............................. 3,091 3,130
------- -------
46,175 51,692
Less -- Current maturities............................. 6,587 6,406
------- -------
$39,588 $45,286
======= =======
</TABLE>
(a) Revolving Credit and Term Loans
The Company has a credit agreement (the Agreement) with a syndicate of
lenders, including Heller Financial Inc., which is also the agent for the
lenders. The Agreement provides for secured borrowings consisting of a revolving
credit facility up to $20,000 and term loans of $34,500. The Agreement provides
that the Company may borrow amounts under the revolving credit line up to the
sum of 85% of eligible accounts receivable plus 60% of eligible inventory, less
any outstanding letters of credit issued by the lenders on behalf of the
Company. At December 27, 1997, approximately $18,316 is available under the
formula, of which $12,945 is borrowed and outstanding. Outstanding letters of
credit issued by the lenders amount to approximately $100 at December 27, 1997.
Principal payments are due in full on June 30, 2003, the termination date of the
Agreement. Mandatory principal prepayments are required upon the occurrence of
certain transactions resulting in cash proceeds to the Company, including asset
dispositions greater than $250 and issuance of capital stock.
Beginning on September 30, 1997 and continuing through June 30, 2003,
principal repayments on the term loans are due on the last day of each
September, December, March and June. The payments per quarter are in varying
amounts set forth in the respective underlying promissory notes.
F-12
<PAGE> 93
SIMONDS INDUSTRIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Borrowings under the Senior Debt are secured by substantially all of the
assets of the Company. During the period ended December 27, 1997, and at the
option of the Company, term and revolver advances bear interest at either the
prime rate (8.5% at December 27, 1997) plus 1% or the LIBOR rate (5.97% at
December 27, 1997) plus 2.5%. Subsequent to December 27, 1997, loans will bear
interest at one of the above rates based on the ratio of the total outstanding
amount of Senior Debt to the Company's operating cash flow. Interest on the
prime-based loans is payable quarterly in arrears on the first day of each June,
September, December and March. Interest on the LIBOR-based loans is payable at
the end of each respective loan period, except for those loans with periods in
excess of three months, which require interest payments in arrears on the last
day of each three-month interval. The average daily unused line bears a
commitment fee of .5% per annum payable quarterly.
The Company is required to comply with a number of affirmative and negative
covenants under the Agreement. Among other things, the Company is required to
satisfy certain financial tests and ratios (including debt service coverage,
leverage ratio and minimum net worth) and is restricted as to additional
borrowings, the payment of cash dividends and the retirement of outstanding
common stock or warrants. The Company is in compliance with these covenants at
December 27, 1997.
(b) German Subsidiary Debt
Wespa, the Company's German subsidiary, has a line of credit with a bank
for approximately $3,100. The line-of-credit agreement bears interest at varying
rates and is due on demand by the bank. The $1,481 outstanding principal at
December 27, 1997 is reflected as a short-term revolving credit loan in the
accompanying consolidated balance sheets.
Wespa has a term loan payable to a bank with an outstanding balance at
December 28, 1996 and December 27, 1997 of $1,351 and $761, respectively.
Principal payments are due in equal quarterly installments of approximately $85,
with a final payment due on December 31, 1999. The loan bears interest at the
French Interbank Offering Rate (FIBOR) (3.7% at December 27, 1997) plus 2.5% and
is secured by substantially all assets of Wespa and a guarantee by the Company.
(c) Subordinated Debt
On May 26, 1995, the Company entered into a Note and Warranty Purchase
Agreement (the Subordinated Agreement) with Massachusetts Capital Resource
Company (MCRC), under which MCRC provided cash of $3,300 in exchange for a
$3,300 subordinated note and warrants to purchase 5,052 shares of common stock.
The proceeds were used in combination with the Senior Debt to fund the
acquisition described in Note 2. This debt is subordinate to the Senior Debt and
bears interest at a rate of 12% per annum. Interest is payable quarterly in
arrears. Principal payments of $412.5 are due on each of September 30, December
31, March 31 and June 30 beginning on September 30, 2000 and continuing through
June 30, 2002. Upon full satisfaction of the Senior Debt, the Company may make
optional prepayments in the amount of $330 for each of the years ending June 30,
1999 through June 30, 2001 without penalty. Principal payments occurring prior
to the year ending June 30, 1999, or in amounts in excess of the optional and
mandatory payments discussed above, will be subject to a penalty ranging from 2%
to 12% of the principal amount being redeemed. The $33 fee charged by MCRC in
connection with the issuance of this loan to the Company is included in other
assets in the accompanying consolidated balance sheets and is being amortized
over the life of the loan.
The warrants to purchase 5,052 shares of the Company's common stock are
exercisable at $46.56 per share. The difference between the $100 fair value per
share at the grant date and the exercise price has been credited to capital in
excess of par value. At December 27, 1997, approximately $170, net of $99
accumulated amortization, is treated as a debt discount and is reflected as a
reduction of the debt in the accompanying consolidated balance sheets. This
discount is being amortized using the effective interest method over the life of
the Subordinated Debt, which results in an effective per annum interest rate of
14.02%.
F-13
<PAGE> 94
SIMONDS INDUSTRIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The Subordinated Agreement contains certain covenants that, among other
things, require the Company to satisfy certain financial tests and ratios
(including debt service coverage and leverage ratio) and is restrictive as to
additional borrowings. The Company is in compliance with these covenants at
December 27, 1997.
The following is a summary of maturities of all of the Company's debt
obligations due after December 27, 1997:
<TABLE>
<CAPTION>
FISCAL YEAR AMOUNT
- ----------- -------
<S> <C>
1998............................................. $ 6,406
1999............................................. 5,551
2000............................................. 6,621
2001............................................. 7,861
2002............................................. 7,559
Thereafter....................................... 17,694
-------
$51,692
=======
</TABLE>
(7) COMMITMENTS AND CONTINGENCIES
(a) Commitments under Operating Leases
Certain of the Company's operations are conducted from facilities rented
under operating leases that expire over the next 10 years. The Company also has
operating leases covering certain office equipment. Substantially all leases
provide for the Company to pay operating expenses in addition to basic rent.
Rent expense was approximately $307, $375, $676 and $710 for the five months
ended May 26, 1995, seven months ended December 30, 1995, and fiscal years ended
December 28, 1996, and December 27, 1997, respectively.
Future minimum annual rentals on noncancelable leases in effect at December
27, 1997, which have initial or remaining terms of more than one year, are as
follows:
<TABLE>
<CAPTION>
FISCAL YEAR AMOUNT
- ----------- ------
<S> <C>
1998................................................ $226
1999................................................ 130
2000................................................ 119
2001................................................ 88
2002................................................ 73
Thereafter.......................................... 66
----
$702
====
</TABLE>
(b) Commitments under Joint Venture
The Company owns 50% of a domestic joint venture that has a 50% investment
in a file manufacturing facility in the People's Republic of China. Previously,
the Company had committed to purchase from the file manufacturing facility all
of the Company's requirements for certain types of files. However, the
manufacturing facility in China is no longer in operation. The Company has
secured alternative sources for these products.
F-14
<PAGE> 95
SIMONDS INDUSTRIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(c) Litigation
The Company is party to a lawsuit that was litigated in China involving the
Chinese joint venture established by the Company's predecessor. This case was
filed by a Chinese joint venture company against Household and the Company,
alleging breach of a 1984 Sales Agreement. Judgment was entered against the
Company in the approximate amount of US$410. The plaintiff has made no effort to
enforce its foreign judgment in the United States. If and when it does so, the
Company will interpose defenses of denial of due process in the Chinese court,
as well as other substantive defenses under the Massachusetts General Laws.
Company management believes the lawsuit to be without merit. In addition, the
Company is a party to other lawsuits that arose in the normal course of
business. In the opinion of management, the final resolutions of these lawsuits
are not expected to materially affect the financial condition or results of
operations of the Company.
(d) Letters of Credit
In the normal course of its business activities, the Company is required
under certain contracts to provide letters of credit that may be drawn down in
the event that the Company fails to perform under the contracts. As of December
27, 1997, the Company has issued or agreed to issue letters of credit totaling
approximately $100.
(e) Employment Contracts
In connection with the acquisition (discussed in Note 2) on May 26, 1995,
the Company entered into employment and noncompetition agreements with two key
officers. The employment agreements provide for an employment term through May
26, 2000. Should employment be terminated by the Company for any reason other
than cause (as defined in the employment agreement), the officers shall be
entitled to receive all salary and bonuses earned through the termination date,
plus the remaining base salary for the period, through the expiration of the
agreement.
(8) INCOME TAXES
Components of Income (loss) before income taxes are as follows:
<TABLE>
<CAPTION>
PREDECESSOR THE COMPANY
------------ --------------------------------------------
FIVE MONTHS SEVEN MONTHS YEAR YEAR
ENDED ENDED ENDED ENDED
MAY 26, DECEMBER 30, DECEMBER 28, DECEMBER 27,
1995 1995 1996 1997
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Domestic................. $(4,517) $3,493 $5,254 $6,441
Foreign.................. 915 1,238 1,800 2,311
------- ------ ------ ------
Total.......... $(3,602) $4,731 $7,054 $8,752
======= ====== ====== ======
</TABLE>
F-15
<PAGE> 96
SIMONDS INDUSTRIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The provision (benefit) for income taxes consists of the following
components for the periods ended:
<TABLE>
<CAPTION>
PREDECESSOR THE COMPANY
------------------------------ -----------------------------
FIVE MONTHS ENDED SEVEN MONTHS ENDED
MAY 26, 1995 DECEMBER 30, 1995
------------------------------ -----------------------------
CURRENT DEFERRED TOTAL CURRENT DEFERRED TOTAL
------- -------- ------- ------- -------- ------
<S> <C> <C> <C> <C> <C> <C>
Domestic --
Federal.................. $(1,476) $ 102 $(1,374) $ -- $1,107 $1,107
State.................... (413) 29 (384) (54) 214 160
Foreign.................... 606 (235) 371 298 291 589
------- ----- ------- ---- ------ ------
Total............ $(1,283) $(104) $(1,387) $244 $1,612 $1,856
======= ===== ======= ==== ====== ======
<CAPTION>
THE COMPANY
----------------------------------------------------------------
YEAR ENDED YEAR ENDED
DECEMBER 28, 1996 DECEMBER 27, 1997
------------------------------- -----------------------------
CURRENT DEFERRED TOTAL CURRENT DEFERRED TOTAL
------- ---------- ------ ------- -------- ------
<S> <C> <C> <C> <C> <C> <C>
Domestic --
Federal.................. $ 889 $ 876 $1,765 $2,153 $ 57 $2,210
State.................... 129 273 402 487 18 505
Foreign.................... 731 173 904 853 183 1,036
------ ------ ------ ------ ---- ------
Total............ $1,749 $1,322 $3,071 $3,493 $258 $3,751
====== ====== ====== ====== ==== ======
An income tax rate reconciliation of the difference between actual and
statutory effective tax rates is as follows:
<CAPTION>
PREDECESSOR THE COMPANY
------------ ---------------------------------------------
FIVE MONTHS SEVEN MONTHS YEAR YEAR
ENDED ENDED ENDED ENDED
MAY 26, DECEMBER 30, DECEMBER 28, DECEMBER 27,
1995 1995 1996 1997
------------ ------------- ------------ ------------
<S> <C> <C> <C> <C>
Provision (benefit) for income
taxes at the federal statutory
rate.......................... $(1,225) $1,608 $2,398 $2,976
State taxes, net of federal tax
effect........................ (227) 298 445 552
Goodwill amortization not
deductible for tax purposes... 30 114 156 166
Higher foreign tax rates........ 15 70 70 89
Other, net...................... 20 (234) 2 (32)
------- ------ ------ ------
Recorded provision (benefit).... $(1,387) $1,856 $3,071 $3,751
======= ====== ====== ======
</TABLE>
F-16
<PAGE> 97
SIMONDS INDUSTRIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Deferred taxes are recorded based on the differences between the financial
statement and tax bases of assets and liabilities. The tax effect of the
temporary differences that give rise to a significant portion of deferred tax
liabilities is as follows at December 28, 1996 and December 27, 1997:
<TABLE>
<CAPTION>
1996 1997
------ -------
<S> <C> <C>
Tax assets --
Reserves and accruals not yet deductible for tax
purposes............................................... $ (948) $(1,383)
Other..................................................... (35) --
------ -------
Total tax assets.................................. (983) (1,383)
------ -------
Tax liabilities --
Property-basis differences................................ 3,576 4,523
Inventory-basis differences............................... 2,480 2,671
Other current assets-basis differences.................... 1,005 863
Other..................................................... -- 303
------ -------
Total tax liabilities............................. 7,061 8,360
------ -------
Net tax liabilities............................... $6,078 $ 6,977
====== =======
</TABLE>
Net deferred tax liabilities are included in the accompanying consolidated
balance sheets in deferred income taxes and currently deferred income taxes.
(9) STOCK OPTION PLANS
Predecessor:
On January 17, 1989, the Board of Directors approved a nonstatutory stock
option plan (the Plan) for management and executive personnel, officers,
directors, employees, agents and consultants of the Company. The Company had
reserved 540,030 shares of the Company's common stock for issuance under the
Plan. Options granted under the Plan were issued at the fair market value at the
date of grant as determined by the Board of Directors. Option prices range from
$2.47 per share to $4.80 per share. The following table summarizes option
activity from December 31, 1994 through May 26, 1995.
<TABLE>
<CAPTION>
1995
--------
<S> <C>
Options Outstanding at December 31, 1994.................... 436,675
Granted................................................... --
Exercised................................................. --
Redeemed for Cash......................................... (150,000)
Redeemed for New Company Stock............................ (286,675)
--------
Options Outstanding at May 26, 1995......................... --
========
Options Exercisable at May 26, 1995......................... --
========
</TABLE>
As of May 26, 1995 all stock options under this plan had been redeemed and
the plan was terminated.
The Company:
On July 25, 1995, the Board of Directors of the Company approved the Stock
Incentive Plan (the Plan) for key executives, management and employees. The
Company has reserved 9,568 shares of the Company's common stock for issuance
under the Plan. Shares issued under the Plan may be either nonqualified stock
options or incentive stock options. Nonqualified options granted under the Plan
are exercisable at a price equal
F-17
<PAGE> 98
SIMONDS INDUSTRIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
to the greater of $100 or the net book value per share at the time of grant.
Incentive stock options are issued at the fair market value at the date of grant
as determined by the Board of Directors. The exercise period for options granted
under the Plan are determined by the Board of Directors, but in the case of
incentive stock options, the period may not exceed 10 years from the grant date.
For incentive stock options granted to those employees owning more than 10% of
the Company's common shares at the grant date, the exercise price is at least
100% of the fair market value at the date of grant, and the option expires five
years from the grant date. At the discretion of the Board of Directors, the
options may be exercisable in installments based on the completion of a
specified service requirement by the optionholder.
Also on July 25, 1995 the Board of Directors approved the Senior Management
Stock Option Plan (the Senior Plan). The Senior Plan is a nonstatutory stock
option plan for senior management and executives of the Company. Options are
100% vested at the grant date and are exercisable into shares of the Company's
common stock at a price of $400 per share. The options expire upon the earliest
of the termination of the optionholder's employment with the Company, the
one-year anniversary of the optionholder's death, or the seventh-year
anniversary of the date of grant. The Company has reserved 28,704.19 shares of
the Company's common stock for issuance under the Senior Plan, and at December
27, 1997, options for all of the shares had been granted.
Stock option activity for the period May 26,1995 through December 27, 1997
is summarized below:
<TABLE>
<CAPTION>
WEIGHTED
WEIGHTED AVERAGE FAIR
AVERAGE VALUE OF
TOTAL SHARES EXERCISE PRICE OPTIONS GRANTED
------------ -------------- ---------------
<S> <C> <C> <C>
Outstanding, May 26, 1995................... -- $ --
Granted................................... 36,904.19 333.34
--------- -------
Outstanding, December 30, 1995.............. 36,904.19 333.34
Granted................................... 200.00 100.00 $56.84
--------- -------
Outstanding, December 28, 1996.............. 37,104.19 332.08
Granted................................... 500.00 113.28 $59.06
Canceled.................................. (366.00) 100.00
Exercised................................. (334.00) 100.00
--------- -------
Outstanding, December 27, 1997.............. 36,904.19 $333.52
========= =======
Options exercisable......................... 36,504.19
=========
Shares reserved for future grants........... 1,034.06
=========
</TABLE>
During 1995, the FASB issued SFAS No. 123, Accounting for Stock-Based
Compensation, which defines a fair-value-based method of accounting for an
employee stock option or similar equity instrument and encourages all entities
to adopt that method of accounting for all of their employee stock compensation
plans. However, it also allows an entity to continue to measure compensation
costs for those plans using the method of accounting prescribed by APB Opinion
25. Entities electing to remain with the accounting in APB Opinion 25 must make
pro forma disclosures of net income as if the fair-value-based method of
accounting defined in SFAS No. 123 had been applied.
The Company has elected to account for its stock-based compensation plans
under APB Opinion 25. No accounting recognition is given to stock options with
exercise prices equal to fair market value on the grant date until the options
are exercised, at which time the proceeds are credited to the shareholders'
equity accounts. For options with an exercise price less than fair market value
on the grant date, the amount that the fair market value exceeds the exercise
price is charged to compensation expense over the period the options
F-18
<PAGE> 99
SIMONDS INDUSTRIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
vest. Had compensation cost for these plans been determined consistent with SFAS
No. 123, the Company's net income would not have been materially different from
amounts reported. Because the SFAS No. 123, method of accounting has not been
applied to options granted prior to January 1, 1995, the resulting pro forma
compensation costs may not be representative of those to be expected in future
years.
Set forth below is a summary of options outstanding at December 27, 1997:
<TABLE>
<CAPTION>
WEIGHTED
AVERAGE
EXERCISE PRICE
OUTSTANDING WEIGHTED WEIGHTED FOR CURRENTLY
RANGE OF NUMBER OF AVERAGE AVERAGE OPTIONS EXERCISABLE
EXERCISE PRICE OPTIONS EXERCISE PRICE REMAINING LIFE EXERCISABLE OPTIONS
- -------------- ----------- -------------- -------------- ----------- --------------
<S> <C> <C> <C> <C> <C>
$100 -- $113.28............ 8,200.00 $100.81 7.56 years 7,800.00 $100.28
400...................... 28,704.19 400.00 7.42 years 28,704.19 400.00
</TABLE>
The fair value of each option grant is estimated on the date of the grant using
the Black-Scholes option pricing model with the following weighted-average
assumptions used for the grants: Risk-free interest rate of 6.62%, expected
dividend yield at zero, expected lives of 10 years and expected volatility of
zero.
(10) SUPPLEMENTAL CASH FLOW DISCLOSURE
Cash payments for interest and income taxes and certain noncash
transactions were as follows for the following periods:
<TABLE>
<CAPTION>
PREDECESSOR THE COMPANY
----------- --------------------------------------------
FIVE SEVEN
MONTHS MONTHS YEAR YEAR
ENDED ENDED ENDED ENDED
MAY 26, DECEMBER 30, DECEMBER 28, DECEMBER 27,
1995 1995 1996 1997
----------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
Interest paid..................... $ 538 $ 2,689 $3,914 $4,429
Income taxes paid................. 1,435 756 1,876 2,733
Liabilities assumed in
acquisitions.................... -- 37,805 2,830 7,879
Issuance of 38,037 shares of
common stock in exchange for the
Predecessor's stock at carryover
basis (Note 2).................. -- 1,252 -- --
</TABLE>
(11) SUMMARIZED QUARTERLY FINANCIAL DATA (UNAUDITED)
The following summarizes unaudited quarterly financial data for the years
ended December 28, 1996 and December 27, 1997:
<TABLE>
<CAPTION>
1996
--------------------------------------------------
FOR THE QUARTERS ENDED
--------------------------------------------------
MARCH 30 JUNE 29 SEPTEMBER 28 DECEMBER 28
-------- ------- ------------ -----------
<S> <C> <C> <C> <C>
Net Sales..................... $25,582 $24,651 $22,689 $25,658
Gross Profit.................. 7,661 7,406 6,364 7,056
Net Income.................... 1,272 1,103 761 874
</TABLE>
F-19
<PAGE> 100
SIMONDS INDUSTRIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
<TABLE>
<CAPTION>
1997
--------------------------------------------------
FOR THE QUARTERS ENDED
--------------------------------------------------
MARCH 29 JUNE 28 SEPTEMBER 27 DECEMBER 27
-------- ------- ------------ -----------
<S> <C> <C> <C> <C>
Net Sales..................... $27,174 $28,202 $27,950 $30,856
Gross Profit.................. 8,219 8,689 8,611 9,457
Net Income.................... 1,151 1,066 1,066 1,285
</TABLE>
(12) OPERATING AND GEOGRAPHIC SEGMENT INFORMATION AND CONCENTRATION OF CREDIT
RISK
The Company operates in one industry segment, industrial cutting tools and
related machinery. No single customer accounts for 10% or more of consolidated
net sales. Prior to 1996, more than 65% of net sales and 75% of identifiable
assets were related to the Company's domestic operations. The following
information by geographic area is presented for 1996 and 1997.
For the year ended December 28, 1996:
<TABLE>
<CAPTION>
TRANSFERS INCOME
NET SALES TO BETWEEN BEFORE
UNAFFILIATED GEOGRAPHIC INCOME IDENTIFIABLE
CUSTOMERS AREAS TAXES ASSETS
------------ ---------- ------- ------------
<S> <C> <C> <C> <C>
Geographic areas:
Domestic Operations............. $65,824 $ 11,133 $ 9,483 $60,812
Canadian Operations............. 10,520 206 625 6,399
European Operations............. 22,317 472 1,590 15,409
------- -------- ------- -------
98,661 11,811 11,698 82,620
Unallocated..................... -- (11,811) (258) --
Interest Expense................ -- -- (4,399) --
Interest Income................. -- -- 13 --
------- -------- ------- -------
Consolidated Totals............... $98,661 $ -- $ 7,054 $82,620
======= ======== ======= =======
For the year ended December 27, 1997:
<CAPTION>
TRANSFERS INCOME
NET SALES TO BETWEEN BEFORE
UNAFFILIATED GEOGRAPHIC INCOME IDENTIFIABLE
CUSTOMERS AREAS TAXES ASSETS
------------ ---------- ------- ------------
<S> <C> <C> <C> <C>
Geographic areas:
Domestic Operations............. $ 75,903 $ 13,954 $11,538 $74,440
Canadian Operations............. 17,172 74 1,151 6,652
European Operations............. 21,107 557 1,546 14,251
-------- -------- ------- -------
114,182 14,585 14,235 95,343
Unallocated..................... -- (14,585) (544) --
Interest Expense................ -- -- (4,963) --
Interest Income................. -- -- 24 --
-------- -------- ------- -------
Consolidated Totals............... $114,182 $ -- $ 8,752 $95,343
======== ======== ======= =======
</TABLE>
F-20
<PAGE> 101
SIMONDS INDUSTRIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(13) SELECTED CONSOLIDATING FINANCIAL STATEMENTS OF PARENT, GUARANTORS, AND
NON-GUARANTORS
In connection with the Offering of Notes, the Company's wholly-owned
domestic subsidiaries will guarantee, on a senior subordinated basis, the Notes,
jointly and severally. The guarantor subsidiaries include combining financial
statements of Armstrong, which was acquired in August 1997, and Simonds Holding
Company. The non-guarantor subsidiaries include combining financial statements
of Wespa, Simonds UK, and Simonds Canada. The following financial data
summarizes the consolidating Company on the equity method of accounting for the
following periods presented:
<TABLE>
<CAPTION>
AS OF DECEMBER 28, 1996
---------------------------------------------------------------------
PARENT GUARANTORS NON-GUARANTORS ELIMINATIONS CONSOLIDATED
------ ---------- -------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash............................ $ 698 $ 3 $ 554 -- $ 1,255
Accounts receivable............. 7,556 -- 6,557 -- 14,113
Interdivision accounts
receivable.................... 20,850 -- -- (20,850) 0
Inventories:
Raw materials................. 3,436 -- 1,090 -- 4,526
Work in progress.............. 5,372 -- 736 -- 6,108
Finished goods................ 6,689 -- 6,169 (257) 12,601
Other current assets............ 2,894 4 503 -- 3,401
-------- ------- ------- -------- -------
Total current assets....... 47,495 7 15,609 (21,107) 42,004
-------- ------- ------- -------- -------
NET PROPERTY, PLANT AND EQUIPMENT.... 20,197 -- 5,460 -- 25,657
-------- ------- ------- -------- -------
OTHER ASSETS:
Investment in subsidiaries...... 27,197 6,629 -- (33,826) --
Intercompany loan............... -- 17,503 -- (17,503) --
Other assets.................... 13,963 -- 996 -- 14,959
-------- ------- ------- -------- -------
Total assets............... $108,852 $24,139 $22,065 $(72,436) $82,620
======== ======= ======= ======== =======
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES.................. $ 34,722 $ 10 $ 5,908 $(20,845) $19,795
LONG-TERM DEBT, net of current
portion............................ 38,623 -- 965 -- 39,588
INTERDIVISION LONG-TERM DEBT......... 15,145 -- 2,358 (17,503) --
OTHER NONCURRENT LIABILITIES......... 3,164 -- 2,875 -- 6,039
TOTAL SHAREHOLDERS' EQUITY........... 17,198 24,129 9,959 (34,088) 17,198
-------- ------- ------- -------- -------
Total liabilities and
shareholders' equity..... $108,852 $24,139 $22,065 $(72,436) $82,620
======== ======= ======= ======== =======
</TABLE>
F-21
<PAGE> 102
SIMONDS INDUSTRIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
<TABLE>
<CAPTION>
AS OF DECEMBER 27, 1997
--------------------------------------------------------------------
PARENT GUARANTORS NON-GUARANTORS ELIMINATIONS CONSOLIDATED
-------- ---------- -------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash............................. $ 25 $ 188 $ 1,042 -- $ 1,255
Accounts receivable.............. 8,896 872 6,417 -- 16,185
Intercompany accounts
receivable.................... 20,929 285 -- (21,214) --
Inventories:
Raw materials................. 3,099 310 767 -- 4,176
Work in progress.............. 5,527 421 792 -- 6,740
Finished goods................ 5,564 576 5,825 (305) 11,660
Other current assets............. 2,416 326 519 -- 3,261
-------- ------- ------- -------- -------
Total current assets.......... 46,456 2,978 15,362 (21,519) 43,277
-------- ------- ------- -------- -------
NET PROPERTY, PLANT AND
EQUIPMENT........................ 22,098 2,582 4,976 -- 29,656
OTHER ASSETS:
Investment in subsidiaries....... 35,736 7,894 -- (43,630) --
Intercompany loan receivable..... -- 17,051 -- (17,051) --
Other assets..................... 17,130 4,366 913 1 22,410
-------- ------- ------- -------- -------
Total assets.................. $121,420 $34,871 $21,251 $(82,199) $95,343
======== ======= ======= ======== =======
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES................ $ 36,202 $ 888 $ 5,751 $(21,215) $21,626
LONG-TERM DEBT, net of current
portion.......................... 44,863 -- 423 -- 45,286
INTERDIVISION LONG-TERM DEBT....... 15,145 0 1,906 (17,051) --
OTHER NONCURRENT LIABILITIES....... 3,595 638 2,583 -- 6,816
SHAREHOLDERS' EQUITY............... 21,615 33,345 10,588 (43,933) 21,615
-------- ------- ------- -------- -------
Total liabilities and
shareholders' equity........ $121,420 $34,871 $21,251 $(82,199) $95,343
======== ======= ======= ======== =======
</TABLE>
F-22
<PAGE> 103
SIMONDS INDUSTRIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(UNAUDITED)
<TABLE>
<CAPTION>
AS OF JUNE 27, 1998
--------------------------------------------------------------------
PARENT GUARANTORS NON-GUARANTORS ELIMINATIONS CONSOLIDATED
-------- ---------- -------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash................................. $ 26 $ 265 $ 544 $ -- $ 835
Accounts receivable, net of
reserves.......................... 8,735 1,040 9,067 -- 18,842
Intercompany accounts receivable..... 997 101 1,320 (2,418) --
Inventories:
Raw materials..................... 3,539 344 1,481 -- 5,364
Work in progress.................. 5,978 332 1,019 -- 7,329
Finished goods.................... 6,545 626 9,138 (305) 16,004
Other current assets................. 2,454 304 810 -- 3,568
-------- ------- ------- -------- --------
Total current assets.............. 28,274 3,012 23,379 (2,723) 51,942
-------- ------- ------- -------- --------
NET PROPERTY, PLANT AND EQUIPMENT...... 22,935 2,525 7,496 -- 32,956
OTHER ASSETS:
Investment in subsidiaries........... 41,403 7,653 -- (49,056) --
Intercompany loan receivable......... -- 22,163 -- (22,163) --
Other assets......................... 16,751 4,236 2,709 -- 23,696
-------- ------- ------- -------- --------
Total assets...................... $109,363 $39,589 $33,584 $(73,942) $108,594
======== ======= ======= ======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES.................... $ 17,485 $ 834 $12,336 $ (2,439) $ 28,216
LONG-TERM DEBT, net of current
portion.............................. 48,548 -- 277 -- 48,825
INTERDIVISION LONG-TERM DEBT........... 15,145 -- 7,018 (22,163) --
OTHER NONCURRENT LIABILITIES........... 3,481 638 2,730 -- 6,849
TOTAL SHAREHOLDERS'
EQUITY............................... 24,704 38,117 11,223 (49,340) 24,704
-------- ------- ------- -------- --------
Total liabilities and
shareholders'
equity.......................... $109,363 $39,589 $33,584 $(73,942) $108,594
======== ======= ======= ======== ========
</TABLE>
F-23
<PAGE> 104
SIMONDS INDUSTRIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
<TABLE>
<CAPTION>
THE PREDECESSOR
-------------------------------------------------------------------
FIVE MONTHS ENDED MAY 26, 1995
-------------------------------------------------------------------
PARENT GUARANTORS NON-GUARANTORS ELIMINATIONS CONSOLIDATED
------ ---------- -------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Net sales.......................... $33,513 $ -- $14,093 $(5,394) $42,212
Cost of goods sold................. 24,147 -- 11,237 (5,282) 30,102
------- ------ ------- ------- -------
Gross profit................ 9,366 -- 2,856 (112) 12,110
Selling, general and administrative
expense.......................... 13,549 -- 1,789 -- 15,338
------- ------ ------- ------- -------
Operating income (loss)..... (4,183) -- 1,067 (112) (3,228)
Other expenses (income):
Interest expense................. 999 -- 200 (549) 650
Interest income.................. -- (549) -- 549 --
Other, net....................... (205) (23) (48) -- (276)
Equity in earnings of
subsidiaries.................. (784) (544) -- 1,328 --
------- ------ ------- ------- -------
Income (loss) before income
taxes.................... (4,193) 1,116 915 (1,440) (3,602)
Provision (benefit) for income
taxes............................ (1,978) 220 371 -- (1,387)
------- ------ ------- ------- -------
Net income (loss)........... $(2,215) $ 896 $ 544 $(1,440) $(2,215)
======= ====== ======= ======= =======
<CAPTION>
THE COMPANY
-------------------------------------------------------------------
SEVEN MONTHS ENDED DECEMBER 30, 1995
-------------------------------------------------------------------
PARENT GUARANTORS NON-GUARANTORS ELIMINATIONS CONSOLIDATED
------ ---------- -------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Net sales........................... $46,865 $ -- $19,320 $(7,253) $58,932
Cost of goods sold.................. 33,272 -- 15,328 (7,247) 41,353
------- ------ ------- ------- -------
Gross profit................. 13,593 -- 3,992 (6) 17,579
Selling, general and administrative
expense........................... 7,668 -- 2,508 -- 10,176
------- ------ ------- ------- -------
Operating income............. 5,925 -- 1,484 (6) 7,403
Other expenses (income):
Interest expense.................. 3,413 29 246 (808) 2,880
Interest income................... (808) 808 --
Other, net........................ (289) -- 81 -- (208)
Equity in earnings of
subsidiaries................... (1,155) (649) -- 1,804 --
------- ------ ------- ------- -------
Income before income taxes... 3,956 1,428 1,157 (1,810) 4,731
Provision for income taxes.......... 1,081 267 508 -- 1,856
------- ------ ------- ------- -------
Net income................... $ 2,875 $1,161 $ 649 $(1,810) $ 2,875
======= ====== ======= ======= =======
</TABLE>
F-24
<PAGE> 105
SIMONDS INDUSTRIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
<TABLE>
<CAPTION>
THE COMPANY
-------------------------------------------------------------------
FISCAL YEAR ENDED DECEMBER 28, 1996
-------------------------------------------------------------------
PARENT GUARANTORS NON-GUARANTORS ELIMINATIONS CONSOLIDATED
------ ---------- -------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Net sales.......................... $76,957 -- $33,515 $(11,811) $98,661
Cost of goods sold................. 55,121 -- 26,421 (11,714) 69,828
------- ------- ------- -------- -------
Gross profit................ 21,836 -- 7,094 (97) 28,833
Selling, general and administrative
expense.......................... 12,155 -- 4,980 -- 17,135
------- ------- ------- -------- -------
Operating income............ 9,681 -- 2,114 (97) 11,698
Other expenses (income):
Interest expense................. 5,411 35 365 (1,412) 4,399
Interest income.................. -- (1,412) -- 1,412 --
Other, net....................... 360 -- (115) 245
Equity in earnings of
subsidiaries.................. (1,735) (960) -- 2,695 --
------- ------- ------- -------- -------
Income before income
taxes.................... 5,645 2,337 1,864 (2,792) 7,054
Provision for income taxes......... 1,662 505 904 -- 3,071
------- ------- ------- -------- -------
Net income.................. $ 3,983 $ 1,832 $ 960 $ (2,792) $ 3,983
======= ======= ======= ======== =======
<CAPTION>
THE COMPANY
-------------------------------------------------------------------
FISCAL YEAR ENDED DECEMBER 27, 1997
-------------------------------------------------------------------
PARENT GUARANTORS NON-GUARANTORS ELIMINATIONS CONSOLIDATED
------ ---------- -------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Net sales.......................... $86,060 $ 3,797 $38,910 $(14,585) $114,182
Cost of goods sold................. 60,571 2,401 30,362 (14,536) 78,798
------- ------- ------- -------- --------
Gross profit................ 25,489 1,396 8,548 (49) 35,384
Selling, general and administrative
expense.......................... 14,288 900 5,961 -- 21,149
------- ------- ------- -------- --------
Operating income............ 11,201 496 2,587 (49) 14,235
Other expenses (income):
Interest expense................. 6,163 196 430 (1,826) 4,963
Interest income.................. -- (1,826) 1,826 --
Other, net....................... 463 186 (129) -- 520
Equity in earnings of
subsidiaries.................. (2,402) (1,231) -- 3,633 --
------- ------- ------- -------- --------
Income before income
taxes.................... 6,977 3,171 2,286 (3,682) 8,752
Provision for income taxes......... 1,976 720 1,055 -- 3,751
------- ------- ------- -------- --------
Net income.................. $ 5,001 $ 2,451 $ 1,231 $ (3,682) $ 5,001
======= ======= ======= ======== ========
</TABLE>
F-25
<PAGE> 106
SIMONDS INDUSTRIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(UNAUDITED)
<TABLE>
<CAPTION>
THE COMPANY
-------------------------------------------------------------------
SIX MONTHS ENDED JUNE 28, 1997
-------------------------------------------------------------------
PARENT GUARANTORS NON-GUARANTORS ELIMINATIONS CONSOLIDATED
------ ---------- -------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Net sales.......................... $42,696 $ -- $20,032 $(7,352) $55,376
Cost of goods sold................. 30,189 -- 15,410 (7,352) 38,247
------- ------ ------- ------- -------
Gross profit................ 12,507 -- 4,622 -- 17,129
Selling, general and administrative
expense.......................... 6,964 -- 2,980 -- 9,944
------- ------ ------- ------- -------
Operating income............ 5,543 -- 1,642 -- 7,185
Other expenses (income):
Interest expense................. 2,962 -- 394 (956) 2,400
Interest income.................. -- (809) (153) 956 (6)
Other, net....................... 211 15 (54) -- 172
Equity in earnings of
subsidiaries.................. (1,296) (788) -- 2,084 --
------- ------ ------- ------- -------
Income before income
taxes.................... 3,666 1,582 1,455 (2,084) 4,619
Provision for income taxes......... 1,018 286 667 -- 1,971
------- ------ ------- ------- -------
Net income.................. $ 2,648 $1,296 $ 788 (2,084) $ 2,648
======= ====== ======= ======= =======
<CAPTION>
THE COMPANY
-------------------------------------------------------------------
SIX MONTHS ENDED JUNE 27, 1998
-------------------------------------------------------------------
PARENT GUARANTORS NON-GUARANTORS ELIMINATIONS CONSOLIDATED
------ ---------- -------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Net sales.......................... $43,960 $5,099 $21,272 $(7,690) $62,641
Cost of goods sold................. 30,344 3,344 16,283 (7,690) 42,281
------- ------ ------- ------- -------
Gross profit................ 13,616 1,755 4,989 -- 20,360
Selling, general and administrative
expense.......................... 7,374 1,310 3,277 -- 11,961
------- ------ ------- ------- -------
Operating income............ 6,242 445 1,712 -- 8,399
Other expenses (income):
Interest expense................. 3,044 238 452 (1,249) 2,485
Interest income.................. -- (1,106) (151) 1,249 (8)
Other, net....................... 240 26 (99) -- 167
Equity in earnings of
subsidiaries.................. (1,654) (853) -- 2,507 --
------- ------ ------- ------- -------
Income before income
taxes.................... 4,612 2,140 1,510 (2,507) 5,755
Provision for income taxes......... 1,298 486 657 -- 2,441
------- ------ ------- ------- -------
Net income.................. $ 3,314 $1,654 $ 853 $(2,507) $ 3,314
======= ====== ======= ======= =======
</TABLE>
F-26
<PAGE> 107
SIMONDS INDUSTRIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
<TABLE>
<CAPTION>
THE PREDECESSOR
----------------------------------------------------------------------
FIVE MONTHS ENDED DECEMBER 30, 1995
----------------------------------------------------------------------
PARENT GUARANTORS NON-GUARANTORS ELIMINATIONS CONSOLIDATED
------- ----------- --------------- ------------ -------------
<S> <C> <C> <C> <C> <C>
Net cash (used in) provided by operating
activities............................. $ 1,773 $ 52 $ (774) $ 402 $ 1,453
Cash flows from investing activities:
Proceeds from asset sales.............. 31 -- 14 -- 45
Purchase of equipment.................. (630) -- (115) -- (745)
------- ---- ------ ----- -------
Net cash used by investing
activities.......................... (599) -- (101) -- (700)
Cash flows from financing activities:
Change in overdraft.................... 147 -- 2 -- 149
Proceeds from issuance of long-term
debt................................ (284) -- 37 -- (247)
Principal payments of long-term debt... (914) -- 173 (391) (1,132)
Intercompany loans..................... -- (27) 27 -- --
------- ---- ------ ----- -------
Net cash (used in) provided by
financing activities................ (1,051) (27) 239 (391) (1,230)
Effect of foreign exchange............. -- -- (178) (11) (189)
------- ---- ------ ----- -------
Increase (decrease) in cash.............. 123 25 (814) -- (666)
Cash at beginning of the period.......... 17 1 1,430 -- 1,448
------- ---- ------ ----- -------
Cash at end of the period................ $ 140 $ 26 $ 616 $ -- $ 782
======= ==== ====== ===== =======
</TABLE>
F-27
<PAGE> 108
SIMONDS INDUSTRIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
<TABLE>
<CAPTION>
THE COMPANY
----------------------------------------------------------------------
SEVEN MONTHS ENDED DECEMBER 30, 1995
----------------------------------------------------------------------
PARENT GUARANTORS NON-GUARANTORS ELIMINATIONS CONSOLIDATED
------- ----------- --------------- ------------ -------------
<S> <C> <C> <C> <C> <C>
Net cash (used in) provided by operating
activities............................. $ 3,040 $(854) $ 978 $ 2,480 $ 5,644
Cash flows from investing activities:
Proceeds from asset sales.............. 22 -- -- -- 22
Purchase of equipment.................. (1,628) -- (267) -- (1,895)
Acquisitions........................... (44,620) -- -- -- (44,620)
------- ----- ------- ------- -------
Net cash used in investing
activities.......................... (46,226) -- (267) -- (46,493)
Cash flows from financing activities:
Change in overdraft.................... 124 -- -- -- 124
Net proceeds from revolving credit
facility............................ 7,643 -- (2,590) -- 5,053
Proceeds from issuance of long-term
debt................................ 35,800 -- -- -- 35,800
Principal payments of long-term debt... (9,125) -- 1,829 (1,481) (8,777)
Intercompany loans..................... -- 829 (829) -- --
Issuance of common stock............... 11,000 -- 1,000 (1,000) 11,000
Other.................................. (1,597) -- -- -- (1,597)
------- ----- ------- ------- -------
Net cash (used in) provided by
financing activities................ 43,845 829 (590) (2,481) 41,603
Effect of foreign exchange............. -- -- 7 1 8
------- ----- ------- ------- -------
Increase (decrease) in cash.............. 659 (25) 128 -- 762
Cash at beginning of the period.......... 140 26 616 -- 782
------- ----- ------- ------- -------
Cash at end of the period................ $ 799 $ 1 $ 744 $ -- $ 1,544
======= ===== ======= ======= =======
</TABLE>
F-28
<PAGE> 109
SIMONDS INDUSTRIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
<TABLE>
<CAPTION>
THE COMPANY
----------------------------------------------------------------------
FISCAL YEAR ENDED DECEMBER 28, 1996
----------------------------------------------------------------------
PARENT GUARANTORS NON-GUARANTORS ELIMINATIONS CONSOLIDATED
------- ----------- --------------- ------------ -------------
<S> <C> <C> <C> <C> <C>
Net cash (used in) provided by operating
activities............................. $ 2,227 $ 1,204 $(1,540) $ 4,774 $ 6,665
Cash flows from investing activities:
Proceeds from asset sales.............. 20 -- 15 -- 35
Purchase of equipment.................. (3,168) -- (470) -- (3,638)
Acquisitions........................... (1,185) (1,185) (1,185) 2,370 (1,185)
------- ------- ------- ------- -------
Net cash used in investing
activities.......................... (4,333) (1,185) (1,640) 2,370 (4,788)
Cash flows from financing activities:
Change in overdraft.................... 266 -- 53 -- 319
Net proceeds from revolving credit
facility............................ -- -- (197) -- (197)
Proceeds from issuance of long-term
debt................................ -- -- -- -- --
Principal payments of long-term debt... 865 -- 611 (4,006) (2,530)
Intercompany loans..................... -- (2,125) 2,125 -- --
Issuance of common stock............... -- 3,100 37 (3,137) --
Dividends (paid) received.............. 992 (992) -- -- --
Other.................................. (118) -- -- -- (118)
------- ------- ------- ------- -------
Net cash (used in) provided by
financing activities................ 2,005 (17) 2,629 (7,143) (2,526)
Effect of foreign exchange............. -- -- 361 (1) 360
------- ------- ------- ------- -------
Increase (decrease) in cash.............. (101) 2 (190) -- (289)
Cash at beginning of the period.......... 799 1 744 -- 1,544
------- ------- ------- ------- -------
Cash at end of the period................ $ 698 $ 3 $ 554 $ -- $ 1,255
======= ======= ======= ======= =======
</TABLE>
F-29
<PAGE> 110
SIMONDS INDUSTRIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
<TABLE>
<CAPTION>
THE COMPANY
-------------------------------------------------------------------
FISCAL YEAR ENDED DECEMBER 27, 1997
-------------------------------------------------------------------
PARENT GUARANTORS NON-GUARANTORS ELIMINATIONS CONSOLIDATED
------ ---------- -------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Net cash provided by operating
activities........................ $ 7,385 $1,644 $ 3,342 $ 675 $13,046
Cash flows from investing
activities:
Proceeds from asset sales......... 65 37 4 1 107
Purchase of equipment............. (3,074) (18) (616) -- (3,708)
Acquisitions...................... (13,703) (8,125) -- 8,125 (13,703)
------- ------ ------- ------- -------
Net cash used by investing
activities..................... (16,712) (8,106) (612) 8,126 (17,304)
Cash flows from financing
activities:
Change in overdraft............... (488) -- (51) -- (539)
Net proceeds from revolving credit
facility....................... -- (536) (909) -- (1,445)
Proceeds from issuance of
long-term debt................. 7,700 -- -- -- 7,700
Principal payments of long-term
debt........................... (722) -- (733) 143 (1,312)
Intercompany loans................ -- 452 (452) -- --
Issuance of common stock.......... 33 9,000 (1) (8,999) 33
Dividends (paid) received......... 2,269 (2,269) -- -- --
Other............................. (138) -- -- -- (138)
------- ------ ------- ------- -------
Net cash (used in) provided by
financing activities........... 8,654 6,647 (2,146) (8,856) 4,299
Effect of foreign exchange........ -- -- (96) 55 (41)
------- ------ ------- ------- -------
Increase (decrease) in cash......... (673) 185 488 -- --
Cash at beginning of the period..... 698 3 554 -- 1,255
------- ------ ------- ------- -------
Cash at end of the period........... $ 25 $ 188 $ 1,042 -- $ 1,255
======= ====== ======= ======= =======
</TABLE>
F-30
<PAGE> 111
SIMONDS INDUSTRIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(UNAUDITED)
<TABLE>
<CAPTION>
THE COMPANY
----------------------------------------------------------------------
FOR SIX MONTHS ENDED JUNE 27, 1997
----------------------------------------------------------------------
PARENT GUARANTORS NON-GUARANTORS ELIMINATIONS CONSOLIDATED
------- ----------- --------------- ------------ -------------
<S> <C> <C> <C> <C> <C>
Net cash (used in) provided by operating
activities............................. $ 3,194 $ 506 $ 1,290 $(14) $ 4,976
Cash flows from investing activities:
Proceeds from asset sales.............. 38 -- -- -- 38
Purchase of equipment.................. (1,242) -- (300) -- (1,542)
Acquisitions........................... (5,578) -- -- -- (5,578)
------- ----- ------- ---- -------
Net cash used in investing
activities........................ (6,782) -- (300) -- (7,082)
Cash flows from financing activities:
Change in overdraft.................... (270) -- (20) -- (290)
Net proceeds from revolving credit
facility............................ -- -- (585) -- (585)
Proceeds from issuance of long-term
debt................................ 6,000 -- -- -- 6,000
Principal payments of long-term debt... (2,960) -- (402) -- (3,362)
Proceeds from issuance of notes
payable............................. -- -- -- -- --
Intercompany loans..................... 33 -- (1) 1 33
Issuance of common stock............... -- -- -- -- --
Purchase of treasury stock............. -- -- -- -- --
Dividends (paid) received.............. 594 (594) -- -- --
Other.................................. (32) 93 (92) (1) (32)
------- ----- ------- ---- -------
Net cash (used in)/provided by
financing activities................ 3,365 (501) (1,100) -- 1,764
Effect of foreign exchange............. -- -- (47) 14 (33)
------- ----- ------- ---- -------
Increase (decrease) in cash.............. (223) 5 (157) -- (375)
Cash at beginning of the period.......... 698 3 554 -- 1,255
------- ----- ------- ---- -------
Cash at end of the period................ $ 475 $ 8 $ 397 -- $ 880
======= ===== ======= ==== =======
</TABLE>
F-31
<PAGE> 112
SIMONDS INDUSTRIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(UNAUDITED)
<TABLE>
<CAPTION>
THE COMPANY
----------------------------------------------------------------------
FOR SIX MONTHS ENDED JUNE 28, 1998
----------------------------------------------------------------------
PARENT GUARANTORS NON-GUARANTORS ELIMINATIONS CONSOLIDATED
------- ----------- --------------- ------------ -------------
<S> <C> <C> <C> <C> <C>
Net cash (used in) provided by operating
activities............................. $(3,043) $ 1,025 $ (600) $ 5,318 $ 2,700
Cash flows from investing activities:
Proceeds from asset sales.............. 1 -- 56 -- 57
Purchase of equipment.................. (1,874) (50) (161) -- (2,085)
Acquisitions........................... -- -- (6,781) -- (6,781)
------- ------- ------- ------- -------
Net cash used in investing
activities........................ (1,873) (50) (6,886) -- (8,809)
Cash flows from financing activities:
Change in overdraft.................... (97) -- (2) -- (99)
Net proceeds from revolving credit
facility............................ 6,167 -- 635 -- 6,802
Proceeds from issuance of long-term
debt................................ -- -- -- -- --
Principal payments of long-term debt... (2,250) -- (66) -- (2,316)
Proceeds from issuance of notes
payable............................. -- -- 1,474 -- 1,474
Intercompany loans..................... -- (5,112) 5,112 -- --
Issuance of common stock............... -- 5,358 -- (5,358) --
Purchase of treasury stock............. (47) -- -- -- (47)
Dividends (paid) received.............. 1,144 (1,144) -- -- --
Other.................................. -- -- -- -- --
------- ------- ------- ------- -------
Net cash (used in)/provided by
financing activities................ 4,917 (898) 7,153 (5,358) 5,814
Effect of foreign exchange............. -- -- (165) 40 (125)
------- ------- ------- ------- -------
Increase (decrease) in cash.............. 1 77 (498) -- (420)
Cash at beginning of the period.......... 25 188 1,042 -- 1,255
------- ------- ------- ------- -------
Cash at end of the period................ $ 26 $ 265 $ 544 -- $ 835
======= ======= ======= ======= =======
</TABLE>
F-32
<PAGE> 113
SIMONDS INDUSTRIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(14) SUBSEQUENT EVENTS AND INTERIM FINANCIAL STATEMENTS (UNAUDITED)
The unaudited condensed consolidated financial statements presented
(Unaudited Financial Statements) as of June 27, 1998 and for the three months
ended June 28, 1997 and June 27, 1998 have been prepared by the Company and
include all of its wholly owned subsidiaries after elimination of intercompany
accounts and transactions, without audit and, in the opinion of management,
reflect all adjustments of a normal recurring nature necessary for a fair
statement of the interim periods presented. Certain information and footnote
disclosures normally included in financial statements prepared in accordance
with generally accepted accounting principles have been omitted; however, the
Company believes that the disclosures included are adequate to make the
information presented not misleading. The Unaudited Financial Statements should
be read in conjunction with the consolidated financial statements and the notes
included herein.
Inventories at June 27, 1998 include approximately $5,364 of raw materials,
$7,329 of work in process and $16,004 in finished goods.
In 1998, the Company adopted SFAS No. 130, Reporting Comprehensive Income,
which requires companies to report all changes in equity during a period, except
those resulting from investment by owners and distribution to owners, in a
financial statement for the period in which they are recognized. The Company has
chosen to disclose Comprehensive Income, which encompasses net income and
foreign currency translation adjustments, in the Consolidated Statements of
Shareholders' Equity. Prior years have been restated to conform to the SFAS No.
130 requirements.
On May 8, 1998, the Company acquired 100% of the outstanding stock of W.
Notting Limited for approximately $6,781, of which $5,358 was paid in cash with
additional financing from the Company's revolving credit facility and the
balance was in the form of a term Promissory Note bearing interest at 8.5% and
repayable April 30, 1999. The acquisition is accounted for as a purchase and the
purchase price has been allocated based on the fair market value of the
underlying assets and liabilities. The purchase allocation is preliminary and
subject to adjustment. Goodwill totaled $1,867 on this acquisition and will be
amortized on a straight-line basis over 40 years. The consolidated financial
statements include the results of operations of W. Notting Limited subsequent to
the date of acquisition.
In July 1998, the Company issued $100,000 of Senior Subordinated Notes (the
"Notes"). Interest on the Notes will accrue from the date of issuance at 10.25%
and is payable semi-annually on January 1 and July 1, commencing January 1,
1999. The Notes are due in 2008 but may be redeemed on or after July 1, 2003 at
specified premium prices. Proceeds from the Notes were primarily used for
repayment of indebtedness, acquisition of treasury stock, and buyout of all
outstanding stock options and warrants. The buyout of stock options resulted in
a pretax compensation charge of approximately $4,500 recorded in July 1998. The
repayment of indebtedness resulted in an extraordinary charge of approximately
$600, net of tax benefit, recorded in July 1998 to write off unamortized debt
discount and deferred financing costs.
The Company concurrently entered into a new Senior Credit Facility with a
commercial lender, that provides $30,000 availability, undrawn as of the
offering date. Borrowings under the Senior Credit Facility are available for
permitted acquisitions and working capital, including letters of credit.
The Senior Credit Facility is secured by first priority liens on all
tangible and intangible personal property and real property assets of the
Company and its subsidiaries.
The Senior Credit Facility will expire in 2003, unless extended. The
interest rate per annum applicable to the Senior Credit Facility will be, at the
Company's option, either LIBOR or the greater of the prime rate or the overnight
federal funds rate plus 0.50%, in each case plus 0.125% to 2.375% depending on
the Company's financial leverage (the "Applicable Margin"). The Company will be
required to pay certain fees in connection with the Senior Credit Facility,
including a commitment fee of 0.50% initially and thereafter at a per annum rate
equal to the Applicable Margin on the unutilized portion of the revolver.
F-33
<PAGE> 114
SIMONDS INDUSTRIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Financing costs relating to the issuance of these Notes are estimated to be
$5,000 and will be amortized over the term of the debt.
Also in July 1998 the Company issued warrants to certain shareholders to
purchase an aggregate of 4393.74 shares of common stock at a price of $458.52
per share, and granted options to two executives to purchase an aggregate of 673
shares of common stock at $458.52 per share.
F-34
<PAGE> 115
================================================================================
NO DEALER, SALES PERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS IN CONNECTION WITH THE OFFER MADE HEREBY, AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY THE COMPANY. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER OR A SOLICITATION
BY ANYONE IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS NOT
AUTHORIZED OR IN WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT
QUALIFIED TO DO SO OR TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR
SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE
HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATIONS THAT THERE HAS
BEEN NO CHANGE IN THE INFORMATION SET FORTH HEREIN OR IN THE AFFAIRS OF THE
COMPANY SINCE THE DATE AS OF WHICH INFORMATION IS GIVEN IN THIS PROSPECTUS.
---------------
TABLE OF CONTENTS
PAGE
----
Summary................................................................... 1
Risk Factors.............................................................. 11
Use of Proceeds........................................................... 15
Capitalization............................................................ 15
Selected Pro Forma Financial Data......................................... 16
Selected Historical Financial Data........................................ 20
Management's Discussion and Analysis of Financial Condition
and Results of Operations............................................... 21
Business.................................................................. 25
Management................................................................ 32
Security Ownership of Certain Beneficial Owners and Management............ 36
Certain Transactions...................................................... 37
Description of Senior Debt................................................ 37
Description of Exchange Notes............................................. 39
The Exchange Offer........................................................ 64
Certain Federal Income Tax Considerations................................. 72
Plan of Distribution...................................................... 75
Legal Matters............................................................. 76
Experts................................................................... 76
Index to Consolidated Financial Statements................................ F-1
================================================================================
$100,000,000
SIMONDS
INDUSTRIES INC.
10 1/4% SENIOR SUBORDINATED
NOTES DUE 2008
--------------
PROSPECTUS
, 1998
--------------
================================================================================
<PAGE> 116
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
As permitted by Section 102(b)(7) of the Delaware General Corporation Law
("DGCL"), the Registrant's Certificate of Incorporation eliminates the personal
liability of a director to the Registrant or its stockholders for monetary
damages for breach of fiduciary duty as a director, except for liability (i) for
any breach of the director's duty of loyalty to the corporation or its
stockholders, (ii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) under Section 174 of
the DGCL (relating to unlawful payment of dividends and unlawful stock purchase
and redemption) or (iv) for any transaction from which the director derived an
improper personal benefit.
Section 145 of the DGCL authorizes a corporation to indemnify its
directors, officers, employees and other agents in terms sufficiently broad to
permit indemnification (including reimbursement for expenses) under certain
circumstances for liabilities arising under the Securities Act of 1933, as
amended (the "Securities Act"). The Registrant's Certificate of Incorporation
contains a provision covering indemnification to the maximum extent permitted
under the DGCL of directors and officers of the Registrant against certain
liabilities and expenses incurred as a result of proceedings involving such
persons in their capacities as directors, officers or agents of the Registrant,
including proceedings under the Securities Act or the Securities Exchange Act of
1934, as amended.
At present, there is no pending litigation or proceeding involving a
director, officer or other agent of the Registrant in which indemnification is
being sought, nor is the Registrant aware of any threatened litigation that may
result in a claim for indemnification by any director, officer or other agent of
the Registrant.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(A) EXHIBITS
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
2.1 Stockholder Agreement dated as of July 7, 1998 among the Company and
its stockholders
2.2 Stock Purchase Agreement dated August 1, 1997 among Simonds Holding
Company, Inc., Armstrong Manufacturing Company and Frederic B.
Andrianoff
2.3 Share Purchase Agreement dated May 7, 1998 among Time Eclipse
Limited, SI Holding Corporation and the shareholders of W. Notting
Limited
3.1 Amended and Restated Certificate of Incorporation of Simonds
3.2 By-laws of Simonds
3.3 Certificate of Incorporation of Armstrong Manufacturing Company
3.4 By-laws of Armstrong Manufacturing Company
3.5 Certificate of Incorporation of Simonds Holding Company, Inc.
3.6 By-laws of Simonds Holding Company, Inc.
3.7 Certificate of Incorporation of Simonds Industries FSC, Inc.
3.8 By-laws of Simonds Industries FSC, Inc.
4.1 Indenture dated as of July 7, 1998 among the Company, the Guarantors
and the Trustee
4.2 Registration Rights Agreement dated July 7, 1998 among the Company,
the Guarantors and Salomon Brothers Inc., First Union Capital Markets
and Schroder & Co. Inc.
4.3 Credit Agreement dated as of July 2, 1998 among the Company, certain
of its Subsidiaries and First Union National Bank
4.4 Credit Agreement between Wespa and The First National Bank of Boston
Zweigniederlassung Frankfurt dated February 23, 1993
4.5 Promissory Notes of Simonds UK Holdings Ltd.
4.6 Purchase Agreement dated June 30, 1998 among the Company, the
Guarantors and Salomon Smith Barney Inc, First Union Capital Markets
and Schroder & Co., Inc.
5.1 Opinion of Wellesley Law Associates
5.2 Opinion of Edwards & Angell, LLP
II-1
<PAGE> 117
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
10.1 Employment and Non-Competition Agreement between the Company and Ross
George dated May 26, 1995, as amended July 7, 1998
10.2 Employment and Non-Competition Agreement between the Company and
Joseph Sylvia dated May 26, 1995, as amended July 7, 1998
10.3 Employment agreement between the Company and Robert Deedrick dated
June 1, 1993
10.4 Employment agreement between the Company and James Palmer dated
March 31, 1995
10.5 Employment agreement between the Company and Roland Richard dated
May 7, 1992
10.6 Employment Agreement dated November 14, 1995 between the Company and
F. A. DeVilling, III
10.7 Employment Agreement dated March 31, 1998 between the Company and
Ronald Owens
10.8 Simonds Industries Inc. Amended and Restated 1998 Stock Incentive Plan
10.9 Escrow Agreement dated May 26, 1995 among SI Holding Corporation, the
Company, Charles W. Doulton, the Massachusetts Capital Resource
Company, the shareholders of Simonds Industries, Inc., the option
holders of the Company and Fleet Bank of Massachusetts, N.A.
10.10 Labor Agreement dated May 5, 1998 between the Company and Local
No. 7896 of the United Steel Workers of America
10.11 Agreement dated April 6, 1998 between the Company and Local 2737-16
of the United Steelworkers of America, AFL-CIO
10.12 Agreement dated April 6, 1998 between the Company and Local
No. 2737-17 of the United Steelworkers of America, AFL-CIO
10.13 Employment Agreement between the Company and Harry Rogers dated
February 23, 1994
12.1 Statement regarding computation of ratios
21.1 Subsidiaries
23.1 Consent of Wellesley Law Associates (included in Exhibit 5.1)
23.2 Consent of Edwards & Angell, LLP (included in Exhibit 5.2)
23.3 Consent of Arthur Andersen LLP
24.1 Powers of Attorney (included on signature pages)
25.1 Statement of Eligibility on Form T-1 of State Street Bank and Trust
Company as Trustee under the Indenture
27.1 Financial Data Schedules
99.1 Form of Letter of Transmittal used in connection with the Exchange
Offer
99.2 Form of Notice of Guaranteed Delivery used in connection with the
Exchange Offer
99.3 Form of Exchange Agent Agreement
ITEM 22. UNDERTAKINGS.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
Registrant, pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the SEC such indemnification is against
public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Registrant of expenses incurred or
paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by any such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question of whether or not such indemnification is against
public policy as expressed in the Securities Act and will be governed by the
final adjudication of such issue.
The undersigned Registrant hereby undertakes:
(1) That, prior to any public reoffering of the securities registered
hereunder through use of a prospectus which is a part of this registration
statement, by any person or party who is deemed to be an underwriter within
the meaning of Rule 145(c), such reoffering prospectus will contain the
information
II-2
<PAGE> 118
called for by the applicable registration form with respect to reofferings
by persons who may be deemed underwriters, in addition to the information
called for by the other items of the applicable form.
(2) That, every prospectus (i) that is filed pursuant to paragraph (1)
immediately preceding, or (ii) that purports to meet the requirements of
Section 10(a)(3) of the Securities Act and is used in connection with an
offering of securities subject to Rule 415, will be filed as a part of an
amendment to the registration statement and will not be used until such
amendment is effective, and that, for purposes of determining any liability
under the Securities Act, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
(3) To supply by means of a post-effective amendment all information
concerning a transaction, and the company being acquired involved therein,
that was not the subject of and included in the registration statement when
it became effective.
(4) That for purposes of determining any liability under the
Securities Act, the information omitted from the form of prospectus filed
as part of this registration statement in reliance upon Rule 430A and
contained in a form of prospectus filed by the Registrant pursuant to Rule
424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be
part of this registration statement as of the time it was declared
effective.
(5) That for purposes of determining any liability under the
Securities Act, each post-effective amendment that contained a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
(6) To respond to requests for information that is incorporated by
reference into the prospectus pursuant to Item 4, 10(b), 11, or 13 of this
form, within one business day of receipt of such request, and to send the
incorporated documents by first class mail or other equally prompt means.
This includes information contained in documents filed subsequent to the
effective date of the registration statement through the date of responding
to the request.
(7) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement;
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the registration statement
or any material change to such information in the registration
statement.
(8) That, for purposes of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a
new registration statement relating to the securities offered therein and
the offering of such securities at the time shall be deemed to be the
initial bona fide offering thereof.
(9) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(10) To file an application for the purpose of determining the
eligibility of the Trustee to act under subsection (a) of section 310 of
the Trust Indenture Act ("Act") in accordance with the rules and
regulations prescribed by the Commission under section 305 (b)(2) of the
Act.
II-3
<PAGE> 119
SIGNATURES
Simonds Industries Inc. Pursuant to the requirements of the Securities
Act, the Registrant has duly caused this Registration Statement on Form S-4 to
be signed on its behalf by the undersigned, thereunto duly authorized, in the
city of Fitchburg, Commonwealth of Massachusetts, on the 2nd day of September,
1998.
SIMONDS INDUSTRIES INC.
By: /s/ ROSS GEORGE
----------------------------------
Ross George
Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement on Form S-4 has been signed by the following persons in
the capacities indicated on the 2nd day of September, 1998.
KNOW ALL MEN BY THESE PRESENTS that each officer and director of Simonds
Industries Inc. whose signature appears below constitutes and appoints Ross
George, Joseph Sylvia and David Witman, and each of them, his or her true and
lawful attorney-in-fact and agent, with full power of substitution and
revocation, for him or her and in his or her name, place and stead, in any and
all capacities, to execute any and all amendments, or any post-effective
amendments and supplements to this Registration Statement, and to file the same,
with all exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorney-in- fact and
agent full power and authority to do and perform each and every act and thing
requisite and necessary to be done, as fully to all intents and purposes as he
or she might or could do in person hereby ratifying and confirming all that said
attorney-in-fact and agent, or his or her substitute or substitutes, may
lawfully do or cause to be done by virtue hereof.
<TABLE>
<CAPTION>
SIGNATURES TITLE
---------- -----
<C> <S>
/s/ ROSS GEORGE President, Chief Executive Officer and Director
- --------------------------------------------------- (principal executive officer)
Ross George
/s/ JOSEPH SYLVIA Executive Vice President, Chief Financial Officer
- --------------------------------------------------- and Director (principal financial and accounting
Joseph Sylvia officer)
/s/ HABIB GORGI Director
- ---------------------------------------------------
Habib Gorgi
/s/ BERNARD BUONANNO III Director
- ---------------------------------------------------
Bernard Buonanno III
</TABLE>
II-4
<PAGE> 120
SIGNATURES
Armstrong Manufacturing Company. Pursuant to the requirements of the
Securities Act, the Registrant has duly caused this Registration Statement on
Form S-4 to be signed on its behalf by the undersigned, thereunto duly
authorized, in the city of Fitchburg, Commonwealth of Massachusetts, on the 2nd
day of September, 1998.
ARMSTRONG MANUFACTURING COMPANY
By: /s/ ROSS GEORGE
----------------------------------
Ross George
Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement on Form S-4 has been signed by the following persons in
the capacities indicated on the 2nd day of September, 1998.
KNOW ALL MEN BY THESE PRESENTS that each officer and director of Armstrong
Manufacturing Company whose signature appears below constitutes and appoints
Ross George, Joseph Sylvia and David Witman, and each of them, his or her true
and lawful attorney-in-fact and agent, with full power of substitution and
revocation, for him or her and in his or her name, place and stead, in any and
all capacities, to execute any and all amendments, or any post-effective
amendments and supplements to this Registration Statement, and to file the same,
with all exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorney-in- fact and
agent full power and authority to do and perform each and every act and thing
requisite and necessary to be done, as fully to all intents and purposes as he
or she might or could do in person hereby ratifying and confirming all that said
attorney-in-fact and agent, or his or her substitute or substitutes, may
lawfully do or cause to be done by virtue hereof.
<TABLE>
<CAPTION>
SIGNATURES TITLE
---------- -----
<C> <S>
/s/ ROSS GEORGE President, Chief Executive Officer and Director
- --------------------------------------------------- (principal executive officer)
Ross George
/s/ JOSEPH SYLVIA Chief Financial Officer and Director (principal
- --------------------------------------------------- financial and accounting officer)
Joseph Sylvia
/s/ JOHN F. WILSON Director
- ---------------------------------------------------
John F. Wilson
</TABLE>
II-5
<PAGE> 121
SIGNATURES
Simonds Holding Company, Inc. Pursuant to the requirements of the
Securities Act, the Registrant has duly caused this Registration Statement on
Form S-4 to be signed on its behalf by the undersigned, thereunto duly
authorized, in the city of Fitchburg, Commonwealth of Massachusetts, on the 2nd
day of September, 1998.
SIMONDS HOLDING COMPANY, INC.
By: /s/ JOSEPH L. SYLVIA
----------------------------------
Joseph L. Sylvia
President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement on Form S-4 has been signed by the following persons in
the capacities indicated on the 2nd day of September, 1998.
KNOW ALL MEN BY THESE PRESENTS that each officer and director of Simonds
Holding Company, Inc. whose signature appears below constitutes and appoints
Ross George, Joseph Sylvia and David Witman, and each of them, his or her true
and lawful attorney-in-fact and agent, with full power of substitution and
revocation, for him or her and in his or her name, place and stead, in any and
all capacities, to execute any and all amendments, or any post-effective
amendments and supplements to this Registration Statement, and to file the same,
with all exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorney-in- fact and
agent full power and authority to do and perform each and every act and thing
requisite and necessary to be done, as fully to all intents and purposes as he
or she might or could do in person hereby ratifying and confirming all that said
attorney-in-fact and agent, or his or her substitute or substitutes, may
lawfully do or cause to be done by virtue hereof.
<TABLE>
<CAPTION>
SIGNATURES TITLE
---------- -----
<C> <S>
/s/ JOSEPH L. SYLVIA President, Treasurer and Director (principal
- --------------------------------------------------- executive officer and principal financial and
Joseph L. Sylvia accounting officer)
/s/ DAVID P. WITMAN Director
- ---------------------------------------------------
David P. Witman
/s/ JOAN DOBRZYNSKI Director
- ---------------------------------------------------
Joan Dobrzynski
/s/ BARBARA STEEN Director
- ---------------------------------------------------
Barbara Steen
</TABLE>
II-6
<PAGE> 122
SIGNATURES
Simonds Industries FSC, Inc. Pursuant to the requirements of the
Securities Act, the Registrant has duly caused this Registration Statement on
Form S-4 to be signed on its behalf by the undersigned, thereunto duly
authorized, in the city of Fitchburg, Commonwealth of Massachusetts, on the 2nd
day of September, 1998.
SIMONDS INDUSTRIES FSC, INC.
By: /s/ ROSS GEORGE
----------------------------------
Ross George
Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement on Form S-4 has been signed by the following persons in
the capacities indicated on the 2nd day of September, 1998.
KNOW ALL MEN BY THESE PRESENTS that each officer and director of Simonds
Industries FSC, Inc. whose signature appears below constitutes and appoints Ross
George, Joseph Sylvia and David Witman, and each of them, his or her true and
lawful attorney-in-fact and agent, with full power of substitution and
revocation, for him or her and in his or her name, place and stead, in any and
all capacities, to execute any and all amendments, or any post-effective
amendments and supplements to this Registration Statement, and to file the same,
with all exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorney-in- fact and
agent full power and authority to do and perform each and every act and thing
requisite and necessary to be done, as fully to all intents and purposes as he
or she might or could do in person hereby ratifying and confirming all that said
attorney-in-fact and agent, or his or her substitute or substitutes, may
lawfully do or cause to be done by virtue hereof.
<TABLE>
<CAPTION>
SIGNATURES TITLE
---------- -----
<C> <S>
/s/ ROSS GEORGE President, Chief Executive Officer and Director
- --------------------------------------------------- (principal executive officer)
Ross George
/s/ JOSEPH SYLVIA Treasurer and Director (principal financial and
- --------------------------------------------------- accounting officer)
Joseph Sylvia
/s/ FRANCISCO J.T. RIVERA Director
- ---------------------------------------------------
Francisco J.T. Rivera
</TABLE>
II-7
<PAGE> 123
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<C> <S>
2.1 Stockholder Agreement dated as of July 7, 1998 among the
Company and its stockholders
2.2 Stock Purchase Agreement dated August 1, 1997 among Simonds
Holding Company, Inc., Armstrong Manufacturing Company and
Frederic B. Andrianoff
2.3 Share Purchase Agreement dated May 7, 1998 among Time
Eclipse Limited, SI Holding Corporation and the shareholders
of W. Notting Limited
3.1 Amended and Restated Certificate of Incorporation of Simonds
3.2 By-laws of Simonds
3.3 Certificate of Incorporation of Armstrong Manufacturing
Company
3.4 By-laws of Armstrong Manufacturing Company
3.5 Certificate of Incorporation of Simonds Holding Company,
Inc.
3.6 By-laws of Simonds Holding Company, Inc.
3.7 Certificate of Incorporation of Simonds Industries FSC, Inc.
3.8 By-laws of Simonds Industries FSC, Inc.
4.1 Indenture dated as of July 7, 1998 among the Company, the
Guarantors and the Trustee
4.2 Registration Rights Agreement dated July 7, 1998 among the
Company, the Guarantors and Salomon Brothers Inc., First
Union Capital Markets and Schroder & Co. Inc.
4.3 Credit Agreement dated as of July 2, 1998 among the Company,
certain of its Subsidiaries and First Union National Bank
4.4 Credit Agreement between Wespa and The First National Bank
of Boston Zweigniederlassung Frankfurt dated February 23,
1993
4.5 Promissory Notes of Simonds UK Holdings Ltd.
4.6 Purchase Agreement dated June 30, 1998 among the Company,
the Guarantors and Salomon Smith Barney Inc, First Union
Capital Markets and Schroder & Co., Inc.
5.1 Opinion of Wellesley Law Associates
5.2 Opinion of Edwards & Angell, LLP
10.1 Employment and Non-Competition Agreement between the Company
and Ross George dated May 26, 1995, as amended July 7, 1998
10.2 Employment and Non-Competition Agreement between the Company
and Joseph Sylvia dated May 26, 1995, as amended July 7,
1998
10.3 Employment agreement between the Company and Robert Deedrick
dated June 1, 1993
10.4 Employment agreement between the Company and James Palmer
dated March 31, 1995
10.5 Employment agreement between the Company and Roland Richard
dated May 7, 1992
10.6 Employment Agreement dated November 14, 1995 between the
Company and F. A. DeVilling, III
10.7 Employment Agreement dated March 31, 1998 between the
Company and Ronald Owens
10.8 Simonds Industries Inc. Amended and Restated 1998 Stock
Incentive Plan
10.9 Escrow Agreement dated May 26, 1995 among SI Holding
Corporation, the Company, Charles W. Doulton, the
Massachusetts Capital Resource Company, the shareholders of
Simonds Industries, Inc., the option holders of the Company
and Fleet Bank of Massachusetts, N.A.
10.10 Labor Agreement dated May 5, 1998 between the Company and
Local No. 7896 of the United Steel Workers of America
10.11 Agreement dated April 6, 1998 between the Company and Local
2737-16 of the United Steelworkers of America, AFL-CIO
10.12 Agreement dated April 6, 1998 between the Company and Local
No. 2737-17 of the United Steelworkers of America, AFL-CIO
10.13 Employment Agreement between the Company and Harry Rogers
dated February 23, 1994
12.1 Statement regarding computation of ratios
21.1 Subsidiaries
23.1 Consent of Wellesley Law Associates (included in Exhibit
5.1)
23.2 Consent of Edwards & Angell, LLP (included in Exhibit 5.2)
23.3 Consent of Arthur Andersen LLP
24.1 Powers of Attorney (included on signature pages)
25.1 Statement of Eligibility on Form T-1 of State Street Bank
and Trust Company as Trustee under the Indenture
27.1 Financial Data Schedules
99.1 Form of Letter of Transmittal used in connection with the
Exchange Offer
99.2 Form of Notice of Guaranteed Delivery used in connection
with the Exchange Offer
99.3 Form of Exchange Agent Agreement
</TABLE>
<PAGE> 1
EXHIBIT 2.1
STOCKHOLDER AGREEMENT
---------------------
SIMONDS INDUSTRIES INC.
135 Intervale Road
Fitchburg, Massachusetts 01420
This Stockholder Agreement dated as of July 7, 1998 is among Simonds
Industries Inc., a Delaware corporation (the "Company"), Fleet Venture
Resources, Inc., a Rhode Island corporation ("FVR"), Kennedy Plaza Partners, a
Rhode Island general partnership ("KPP"), Fleet Equity Partners VI, L.P., a
Delaware limited partnership ("FEP"), Chisholm Partners III, L.P., a Delaware
limited partnership ("Chisholm"), Private Market Fund, L.P., a Delaware limited
partnership ("Pacific"), Heller Financial, Inc., a Delaware corporation
("Heller"), First Union Investors, Inc., a North Carolina corporation ("First
Union"), Donald E. Bates, an individual residing in the Commonwealth of
Massachusetts ("Bates"), and those persons designated as managers on the
signature pages hereto (collectively, the "Managers").
WHEREAS, the parties have entered into a Subscription Agreement (as defined
herein) of even date herewith pursuant to which such parties have agreed to
purchase shares of capital stock in the Company;
WHEREAS, the Company has repurchased various shares of capital stock,
warrants and options held in the Company as of the date hereof pursuant to a
recapitalization of the Company (the "Recapitalization");
WHEREAS, the parties to that certain Amended and Restated Stockholder
Agreement dated June 20, 1995 (the "Prior Agreement") have terminated the Prior
Agreement, effective as of the date hereof; and
WHEREAS, the parties desire to enter into this Stockholder Agreement to
reflect certain agreements concerning the Company's repurchase rights and
obligations set forth in ARTICLE II hereof, and to read in all respects as set
forth herein.
NOW THEREFORE, the parties hereby agree as follows:
Section 1. DEFINITIONS. For all purposes of this Agreement, the following
terms shall have the meanings set forth below:
AFFILIATE. Affiliate shall mean as applied to any specified Person, any
Person directly or indirectly controlling, controlled by or under direct or
indirect common control with such specified Person and shall also include (a)
any Person who is an officer, director, manager or beneficial owner of at least
5% of the then outstanding equity securities of such specified Person and Family
Members and officers, directors or managers of any such Person, (b) any Person
in which such specified Person or an Affiliate (as defined in clause (a) above)
of such specified Person shall, directly or indirectly, either beneficially own
at least 10% of the then outstanding
<PAGE> 2
equity securities or constitute at least a 10% equity participant, and (c) in
the case of a specified Person who is an individual, any Family Member of such
Person.
APPROVED SALE. See Section 5.1.
BASE RATE. Base Rate shall mean the rate of interest announced from time to
time by Fleet Bank of Massachusetts, N.A. at its head office in Boston,
Massachusetts as its "prime rate".
BATES. See preamble.
BOOK VALUE. Book Value shall mean an amount, to be determined as of any
point in time, which is equal to the sum of the Company's recorded amounts of:
(i) the Stock; (ii) additional paid-in capital specifically related to the
Stock; (iii) the Company's retained earnings or shareholders' deficit, as the
case may be (it being understood that if a deficit exists, whether created by
cumulative net losses or charges for accretion on mandatorily redeemable
preferred stock, such amount will reduce Book Value); (iv) the initial value
assigned to the Warrants at date of issuance (it being understood that any
increase above the initial value will not increase Book Value nor will the
charge to retained earnings associated with such increase reduce Book Value);
(v) the initial value assigned to any outstanding and exercisable options,
warrants, or convertible securities, in each case to the extent then
exercisable; and (vi) treasury stock related to the Stock (it being understood
that any treasury stock amount will reduce Book Value). All of these components
of Book Value shall be determined in accordance with generally accepted
accounting principles, consistently applied.
BOOK VALUE CHANGE. Book Value Change shall mean the increase or decrease in
Book Value from the date hereof (after giving effect to the Recapitalization) to
the applicable Termination Date.
BOOK VALUE DECREASE. Book Value Decrease shall mean the decrease in Book
Value from the date hereof (after giving effect to the Recapitalization) to the
applicable Termination Date.
BOOK VALUE INCREASE. Book Value Increase shall mean the increase in Book
Value from the date hereof (after giving effect to the Recapitalization) to the
applicable Termination Date.
BOOK VALUE PER SHARE. Book Value Per Share shall mean, in the case of each
share of Management Stock being transferred with respect to any Termination
Date, the quotient obtained by dividing (a) the Book Value calculated as of the
date of the end of the month immediately preceding such Termination Date by (b)
the sum of the number of shares of Stock then outstanding, PLUS the sum of the
number of dilutive shares of Stock as determined under the treasury stock method
defined in APB Opinion No. 15 for outstanding and exercisable warrants, options,
or convertible securities.
BOOK VALUE PER SHARE CHANGE. Book Value Per Share Change shall mean the
increase or decrease in Book Value Per Share from the date hereof (after giving
effect to the Recapitalization) to the Applicable Termination Date.
-2-
<PAGE> 3
BOOK VALUE PER SHARE DECREASE. Book Value Per Share Decrease shall mean the
decrease in Book Value Per Share from the date hereof (after giving effect to
the Recapitalization) to the applicable Termination Date.
BOOK VALUE PER SHARE INCREASE. Book Value Per Share Increase shall mean the
increase in Book Value Per Share from the date hereof (after giving effect to
the Recapitalization) to the applicable Termination Date.
CAUSE. Cause shall mean, with respect to any Manager, (a) an act of fraud,
embezzlement, misappropriation or breach of fiduciary duty against the Company
by such Manager as determined by the Company's Board of Directors in its
reasonable discretion, (b) any intentional, knowing or reckless action or
inaction by such Manager which causes the breach of a representation, warranty
or covenant by the Company or any Management Stockholder under any of the
Related Agreements, (c) conviction of such Manager by a court of competent
jurisdiction of or a plea of guilty or nolo contendere by such Manager to any
felony or crime involving moral turpitude, (d) the habitual drug addiction or
intoxication of any Manager, (e) the willful failure or refusal of any Manager
to perform his duties under the terms of his employment with the Company,
including the willful failure or refusal of such Manager to follow the
instructions of the Company's Board of Directors or Chief Executive Officer, (f)
the breach by any Manager of any terms of his employment with the Company
(including, without limitation, the breach of any non-competition,
non-disclosure, or other restrictive covenants), or (g) the breach by such
Manager of any of the covenants, terms and provisions of Sections 3.1, 5, and 7
hereof.
CHARTER. Charter shall include the articles or certificate of
incorporation, statute, constitution, joint venture, partnership or operating
agreement or articles or other organizational document of any Person other than
an individual, each as from time to time amended or modified.
CHISHOLM. See preamble.
COMPANY. See preamble.
CONSENT OF THE FLEET INSTITUTIONAL STOCKHOLDERS. Consent of the Fleet
Institutional Stockholders shall mean the written consent of each of FVR, FEP,
Chisholm and KPP.
CONSENT OF THE INSTITUTIONAL STOCKHOLDERS. Consent of the Institutional
Stockholders means the written consent of Institutional Stockholders holding a
majority of the shares of Stock held by all Institutional Stockholders;
provided, however, that in the case of any matter requiring such consent that
has a material and adverse effect on any Institutional Stockholder that is
substantially and disproportionately more burdensome to such Institutional
Stockholder than to the other Institutional Stockholders, the Consent of the
Institutional Stockholders shall require the consent of any such Institutional
Stockholder so affected; provided, further, in no event shall any consent,
otherwise required hereunder, of any BHC Holder (as defined in the Subscription
Agreement) (other than pursuant to such BHC Holder's rights as a holder of Class
A Common Stock) be so required (i) unless the matter subject to such consent
would "significantly and adversely affect the rights or preferences of the
security or interest" of such BHC Holder, as such
-3-
<PAGE> 4
terms are used in Section 225.2(q)(2)(i) of Regulation Y of the Board of
Governors of the Federal Reserve System or (ii) if the result of such consent
would be to cause the interests of such BHC Holder in the Company (other than
such BHC Holder's Class A Common Stock) to be considered "voting securities" for
purposes of said Regulation Y.
DELAYED CLOSING DATE. See Section 2.3(b).
DISABILITY. A Manager shall be deemed to have a disability if an
independent medical doctor (selected by the Company's health or disability
insurer) certifies that such Manager has for six (6) months, consecutive or
non-consecutive, in any twelve (12) month period been disabled in such a manner
as to be unable to perform the essential functions of his then current position,
with or without reasonable accommodation. Any refusal by such Manager to submit
to a medical examination for the purpose of certifying disability shall be
deemed to constitute conclusive evidence of such Manager's disability.
EMPLOYEE STOCK OPTION PLAN. Employee Stock Option Plan shall have the same
meaning herein as in the Subscription Agreement.
EXECUTIVE STOCK OPTIONS. Executive Stock Options shall have the same
meaning herein as in the Subscription Agreement.
EXERCISE NOTICE. See Section 2.3(a).
FAMILY MEMBERS. Family Members shall mean, as applied to any individual,
(i) any spouse, child, parent, brother or sister, or spouse of any thereof, and
(ii) each trust or other entity created for the benefit of such individual or
one or more of such Persons and each custodian of property of such individual or
one or more such Persons.
FAMILY TRANSFEREE. Family Transferee shall mean any Family Member of a
Stockholder (i) to whom such Stockholder has transferred shares of Stock
pursuant to Section 3.1 and (ii) who has executed an Instrument of Accession.
FEP. See preamble.
FIRST UNION. See preamble.
FLEET INSTITUTIONAL STOCKHOLDERS. Fleet Institutional Stockholders means
Chisholm, FEP, FVR and KPP.
FVR. See preamble.
HELLER. See preamble.
INSTITUTIONAL STOCK. Institutional Stock shall mean (a) all shares of Stock
issued to the Institutional Stockholders, (b) any shares of Stock issued to an
Institutional Stockholder upon exercise of a Warrant and (c) all shares of Stock
issued with respect to the foregoing by way of stock dividend or stock split or
in connection with any merger, consolidation, recapitalization or
-4-
<PAGE> 5
other reorganization affecting the Stock. Institutional Stock will continue to
be Institutional Stock in the hands of any holder and each transferee thereof
(provided that the transfer to such transferee is permitted by this Agreement)
will succeed to the rights and obligations of a holder of Institutional Stock
hereunder, PROVIDED that shares of Institutional Stock will cease to be shares
of Institutional Stock when transferred (i) pursuant to a Public Sale or an
Approved Sale or (ii) to the Company or its Subsidiaries.
INSTITUTIONAL STOCKHOLDERS. Institutional Stockholders shall mean FVR, FEP,
KPP, Bates, Chisholm, Pacific, Heller, First Union and any other Person who (i)
acquires Institutional Stock pursuant to the terms hereof and (ii) has executed
an Instrument of Accession. Whenever this Agreement refers to the exercise of
consent, voting, or approval rights of the Institutional Stockholders, such
rights shall be exercisable only by Consent of the Institutional Stockholders.
INSTITUTION ELECTION PERIOD. See Section 3.2.
INSTRUMENT OF ACCESSION. Instrument of Accession shall mean an Instrument
of Accession in the form of SCHEDULE 1 hereto.
KOWIN-SIMONDS. Kowin-Simonds shall mean Kowin-Simonds, Inc., a Delaware
corporation of which the Company owns fifty percent (50%) of the issued and
outstanding capital stock.
KPP. See preamble.
MANAGEMENT STOCK. Management Stock shall mean (a) all shares of Stock
purchased by or issued to the Managers, including Stock issued to the Managers
upon exercise of the Executive Stock Options, (b) all shares of Stock issued
with respect to the foregoing by way of stock dividend or stock split or in
Connection with any merger, consolidation, recapitalization or mother
reorganization affecting the Stock, and (c) all shares of Stock issued to any
holder of the Employee Stock Options upon the exercise of the Employee Stock
options. Management Stock will continue to be Management Stock in the hands of
any holder and each transferee thereof (provided that the transfer to such
transferee is permitted by this Agreement) will succeed to rights and
obligations of a holder of Management Stock hereunder, PROVIDED that shares of
Management Stock will cease to be shares of Management Stock when transferred
(i) pursuant to a Public Sale or an Approved Sale or (ii) to the Company.
MANAGEMENT STOCKHOLDERS. Management Stockholders shall mean each Manager
for so long as such Manager holds shares of Management Stock and any other
Person who (i) holds Management Stock and (ii) has executed an Instrument of
Accession.
MANAGERS. Managers shall mean those Persons listed on the signature pages
hereof under the caption "Managers" and any officers, employee, director or
consultant of the Company who receives shares of Stock from the Company and
executes and delivers an Instrument of Accession.
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MARKET VALUE PER SHARE. Market Value Per Share shall mean the fair value
per share of shares of Management Stock being transferred with respect to any
Termination Date, determined as of the applicable Termination Date based on the
number of shares of Stock then outstanding, PLUS the sum of the number of
dilutive shares of Stock as determined under the treasury stock method defined
in APB Opinion No. 15 for outstanding and exercisable warrants, options, or
convertible securities, as determined in the manner set forth below. The
Company's Board of Directors, by affirmative vote of at least a majority of the
Board (excluding any Management Stockholder who is the subject of the
termination giving rise to such determination), shall make a good faith
determination of the fair value per share of such shares of Management Stock
(the "Board Determination") and shall cause such determination to be delivered
to such Management Stockholder. Within fifteen (15) days of such delivery, the
Management Stockholder may object to the Board Determination. If such Management
Stockholder does not so object, then the Market Value Per Share of such shares
of Management Stock shall be equal to the Board Determination. If such
Management Stockholder shall make such an objection, he may select a qualified
appraiser to make a good faith determination of the fair per share value of such
shares of Stock (the "Initial Appraised Value"). If the Initial Appraised Value
does not exceed (or is not less than) the Board Determination by more than ten
percent (10%) of the Board Determination, then the Market Value Per Share of
such shares of Management Stock shall be equal to the mathematical mean of the
Initial Appraised Value and the Board Determination. If the Initial Appraised
Value exceeds (or is less than) the Board Determination by more than ten percent
(10%) of the Board Determination, then a majority of the Board of Directors
(excluding such Management Stockholder) and such Management Stockholder shall
select a mutually acceptable additional qualified appraiser to make a good faith
determination of the fair per share value of such shares of Management Stock
(the "Second Appraised Value"). The Market Value Per Share of such shares of
Management Stock shall be equal to the mathematical mean of the two closest
values of the Board Determination, the Initial Appraised Value and the Second
Appraised Value. The foregoing determinations shall take into consideration (i)
the value of the Company as an ongoing entity, (ii) any and all indebtedness of
the Company for borrowed money, (iii) any and all preferred stock or class or
classes of common stock senior to the shares of Management Stock being
repurchased, and (iv) any and all cash and cash equivalents held by the Company
including any insurance proceeds paid or payable to the Company if the event
giving rise to the termination is the death of the Management Stockholder; but
without taking into consideration any minority discount.
NON-TRANSFERRING STOCKHOLDERS. See Section 3.2.
OFFER NOTICE. See Section 3.2.
OTHER STOCK. Other Stock shall mean (a) all Restricted Securities other
than Institutional Stock and (b) all shares of Stock issued with respect to the
foregoing by way of stock dividend or stock split or in connection with any
merger, consolidation, recapitalization or other reorganization affecting the
Stock. Other Stock will continue to be Other Stock in the hands of any holder
and each transferee thereof (provided that the transfer to such transferee is
permitted by this Agreement) will succeed to the rights and obligations of a
holder of Other Stock hereunder,
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provided that shares of Other Stock will cease to be shares of Other Stock when
transferred (i) pursuant to a Public Sale or an Approved Sale or (ii) to the
Company or its Subsidiaries.
OTHER STOCKHOLDERS. Other Stockholders shall mean each of Stockholders, for
so long as such Person holds shares of Other Stock, and any other Person who (i)
holds Other Stock and (ii) has executed an Instrument of Accession.
PACIFIC. See preamble.
PERMITTED TRANSFERS. See Section 3.1.
PERSON. Person shall mean an individual, partnership, corporation limited
liability company, association, trust, joint venture, unincorporated
organization, or any government, governmental department or agency or political
subdivision thereof.
PERSONAL REPRESENTATIVE. Personal Representative shall mean the successor
or legal representative (including without limitation, a guardian, executor,
administrator or conservator) of a deceased or incompetent Stockholder.
PRINCIPAL SUBSIDIARY. Principal Subsidiary shall mean Simonds Holding,
Simonds FSC and any other Subsidiary designated in writing to the Company's
Board of Directors as a, "Principal Subsidiary" by FVR, FEP, KPP and Chisholm.
PUBLIC SALE. Public Sale shall mean any sale of Restricted Securities to
the public pursuant to a public offering registered under the Securities Act or
to the public through a broker or market-maker pursuant to the provisions of
Rule 144 (or any successor rule) adopted under the Securities Act or any other
public offering not required to be registered under the Securities Act.
REGISTRATION RIGHTS AGREEMENT. Registration Rights Agreement shall mean the
Registration Rights Agreement of even date herewith among the Company and the
Stockholders pursuant to which the Stockholders are entitled to certain
registration rights in respect of the Restricted Securities as provided therein.
REMAINING INSTITUTIONAL STOCKHOLDERS. Remaining Institutional Stockholders
means those Institutional Stockholders other than the Fleet Institutional
Stockholders.
REMAINING MANAGEMENT STOCKHOLDERS. See Section 2.3(a).
RELATED AGREEMENTS. Related Agreements shall mean the Repurchase
Agreements, the Subscription Agreement and the Registration Rights Agreement.
REPURCHASE AGREEMENTS. Repurchase Agreements means those certain agreements
listed on SCHEDULE 2 hereof.
RESTRICTED SECURITIES. Restricted Securities shall mean at any particular
time all of the Company's then outstanding shares of Stock and options,
warrants, including the Warrants, and securities convertible therefor which have
not been sold in a Public Sale.
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RETIREMENT. Retirement means the retirement of a Manager at the retirement
age prescribed by any applicable employment agreement between such Manager and
the Company, or if no such agreement exists, prescribed by the Company for
employees of the Company holding positions comparable to such Manager.
SECURITIES ACT. Securities Act shall mean the Securities Act of 1933, as
amended, or any successor federal statute, and the rules and regulations of the
Securities and Exchange Commission, thereunder, all as the same shall be in
effect from time to time.
SIMONDS CANADA. Simonds Canada shall mean Simonds Industries, Inc., a
business corporation organized under the Ontario Business Corporation Act of
which Simonds Holding owns one hundred percent (100%) of the issued and
outstanding capital stock.
SIMONDS FSC. Simonds FSC shall mean Simonds Industries FSC, Inc., a
corporation formed under the laws of the U.S. Virgin Islands of which the
Company owns one hundred percent (100%) of the issued and outstanding capital
stock.
SIMONDS HOLDING. Simonds Holding shall mean Simonds Holding Company, Inc.,
a Delaware corporation of which the Company owns one hundred percent (100%) of
the issued and outstanding capital stock.
SIMONDS U.K. Simonds U.K. shall mean Simonds Industries Limited, a company
formed under the laws of the United Kingdom of which Simonds Holding owns one
hundred percent (100%) of the issued and outstanding capital stock.
STOCK. Stock shall mean (a) the Class A Common Stock, $.0l par value, and
Class B Common Stock, $.01 par value, of the Company and (b) any shares of any
other class of capital stock of the Company hereafter issued which is (i) not
preferred in the Company's Charter as to dividends or assets over any class of
stock of the Company, (ii) not subject to redemption in the Company's Charter,
or (iii) issued to the holders of shares of Stock upon any reclassification
thereof.
STOCKHOLDERS. Stockholders shall mean, initially, the Institutional
Stockholders, the Other Stockholders and thereafter any Person who becomes a
party to this Agreement by executing an Instrument of Accession in connection
with the transfer or issuance to or acquisition by such Person of any Restricted
Securities; provided that a Person shall cease to be a Stockholder hereunder at
such time as such Person ceases to own Restricted Securities.
SUBSCRIPTION AGREEMENT. Subscription Agreement shall mean the Subscription
and Investment Agreement of even date herewith among the Company, the
Institutional Stockholders and the Management Stockholders pursuant to which,
INTER ALIA, the Institutional Stockholders and the Management Stockholders
agreed to purchase Stock.
SUBSIDIARY. Subsidiary shall mean any Person of which the Company or other
specified Person now or hereafter shall at the time own directly or indirectly
through a Subsidiary at least a majority of the outstanding capital stock (or
other shares of beneficial interest) entitled to vote
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generally, including without limitation Simonds FSC, Simonds Holding,
Kowin-Simonds, Simonds U.K., Simonds Canada and Wespa.
TERMINATED MANAGER. Any Manager whose employment with the Company and its
Subsidiaries has been terminated for any reason.
TERMINATION DATE. The date on which any Manager's employment with the
Company and its Subsidiaries is terminated.
TRANSFER. See Section 3.1.
TRANSFERRING STOCKHOLDER. See Section 3.2.
WARRANTS. Warrants means those certain warrants issued to the Institutional
Holders on the date hereof listed on SCHEDULE 3 hereto.
WESPA. Wespa shall mean Wespa Metallsagenfabrik Simonds Industries GmbH, a
German business entity of which Simonds Holding owns one hundred percent (100%)
of the issued and outstanding capital stock.
Section 2. REPURCHASE RIGHTS AND OBLIGATIONS WITH RESPECT TO MANAGEMENT
STOCK.
2.1. TERMINATION FOR CAUSE; RESIGNATION.
(a) Subject to and in accordance with the other provisions of this Section
2, if the employment or other engagement by the Company or any of its
Subsidiaries of any Manager is terminated for Cause by the Company or any of its
Subsidiaries at any time after the date hereof, the Company may, but shall not
be obligated to, repurchase from such Terminated Manager and, if the Company so
elects, such Terminated Manager shall be obligated to sell to the Company, all
or any portion of such Terminated Manager's shares of Management Stock (whether
held by such Terminated Manager or such Terminated Manager's Transferees) at a
purchase price share equal to the lowest of (i) four hundred fifty-eight dollars
and 52/100 ($458.52) per share reduced by Book Value Per Share Decrease, if any,
(ii) the Market Value Per Share determined as of the applicable Termination Date
or (iii) the Market Value Per Share determined as of the date of the first to
occur of (a) the effective date of any Public Sale or (b) the effective date of
the sale of the Company (whether by merger, consolidation, sale of all or
substantially all of the Company's assets or of the assets of the Subsidiaries,
or sale of all the outstanding shares of Stock). The purchase price payable in
such event shall be paid in accordance with the provisions of Section 2.3
hereof.
(b) Subject to and in accordance with the other provisions of this Section
2, if the employment or other engagement by the Company or any of its
Subsidiaries of any Manager is terminated by reason of such Manager's
resignation (other than by reason of Retirement) at any time after the date
hereof, the Company may, but shall not be obligated to, repurchase from such
Terminated Manager and, if the Company so elects, such Terminated Manager shall
be obligated
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to sell to the Company, all or any portion of such Terminated Manager's shares
of Management Stock (whether held by such Terminated Manager or such Terminated
Manager's Transferees) at a purchase price share equal to four hundred
fifty-eight dollars and 52/100 ($458.52) per share increased or decreased as the
case may be by the Book Value Per Share Change determined as of the Applicable
Termination Date. The purchase price payable in such event shall be paid in
accordance with the provisions of Section 2.3 hereof.
2.2. DEATH, DISABILITY OR TERMINATION WITHOUT CAUSE. Subject to and in
accordance with the other provisions of this Section 2, if the employment or
other engagement by the Company or any of its Subsidiaries of any Manager is
terminated at any time by reason of such Manager's death or Disability, or if
the Company or any of its Subsidiaries terminates such Manager's employment
other than for Cause, then the Company may, but shall not be obligated to,
repurchase from such Terminated Manager or such Terminated Manager's Personal
Representative, as applicable, all or any portion of such Terminated Manager's
Management Stock (whether held by such Terminated Manager or such Terminated
Manager's Family Transferees) at a purchase price per Share equal to the higher
of (i) the Market Value Per Share or (ii) the Book Value Per Share Increase,
determined as of the applicable Termination Date. The purchase price payable in
such event shall be paid in accordance with the provisions of Section 2.3
hereof.
2.3 REPURCHASE CLOSINGS.
(a) In the event that the Company elects to exercise its call rights
pursuant to this Section 2, the Company shall deliver written notice to the
Terminated Manager or such Terminated Manager's Personal Representative, as
applicable, (the "Exercise Notice") specifying the number of shares of
Management Stock to be repurchased within 90 days following the applicable
Termination Date. The repurchase of such shares pursuant to the exercise of such
call shall be completed at the Company's principal office within 30 days after
delivery of the Exercise Notice, except as otherwise provided in Section 2.3(b)
or Section 2.3(d) below. In the event that the Company fails to deliver an
Exercise Notice within 90 days following the later of the applicable Termination
Date or the date on which a Personal Representative is appointed for such
Terminated Manager, if applicable, (i) the call rights under this Section 2 with
respect to the Terminated Manager's Management Stock shall terminate, (ii) the
Company shall deliver written notice of the same (the "Company Call Expiration
Notice") to each other Management Stockholder (the "Remaining Management
Stockholders") and (iii) each of the Remaining Management Stockholders may
elect, by delivery of written notice to the Company within 15 days after
delivery of the Company Call Expiration Notice, to repurchase all or any Portion
of such Terminated Manager's Management Stock that is subject to the Company's
call rights for cash at the same price as the Company would have paid for such
Management Stock had the Company exercised its call rights with respect thereto
pursuant to this Section 2. In the event that the aggregate number of shares
which the Remaining Management Stockholders elect to purchase exceeds the total
number of shares of such Terminated Manager's Management Stock that is subject
to the Company's call rights, each Remaining Management Stockholder will be
entitled to purchase a PRO RATA portion of such shares based upon the respective
number of such shares which each Remaining Management Stockholder had elected to
purchase. The repurchase
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of such shares by the Remaining Management Stockholders shall be completed at
the Company's principal office within 30 days after delivery of the Company Call
Expiration Notice, except as otherwise provided by Section 2.3(d). In the event
that any remaining Management Stockholder fails to notify the Company of his
election to repurchase any shares of Management stock of the Terminated Manager
within 15 days after the applicable Company all Expiration Notice or, except as
otherwise provided in Section 2.3(d), fails to tender cash payment of the
purchase price for such shares at the Company's principal office within 30 days
following such Company Call Expiration Notice, the call rights of such Remaining
Management Stockholder with respect to such Terminated Manager's Management
Stock shall lapse. At any closing of any purchase of any shares of Management
Stock pursuant to this SECTION 2 other than the purchase of shares under Section
2.1(a) hereof (as to which the Company or the purchasing Management Stockholders
have elected the special purchase option provided for in Section 2.3(d)), the
Terminated Manager, the Terminated Manager's Personal Representative and any
Family Transferees (subject to Section 2.4) shall deliver to the Company, or the
purchasing Management Stockholders, as applicable, duly endorsed stock
certificates for the shares of Management Stock being repurchased by the
Company, or the purchasing Management Stockholders, as applicable, against
receipt of such Person's check for the purchase price therefor, subject to the
provisions of Sections 2.3(b) and (c) below.
(b) Notwithstanding the foregoing, in the event that the payment by the
Company of any portion of the purchase price for any shares of Management Stock
that the Company is entitled to, repurchase pursuant to this Section 2 is, at
the time such payment would otherwise be due hereunder, prohibited by law due to
any existing or prospective impairment of the Company's capital, or by the terms
of any documents evidencing the Company's Indebtedness, as such term is defined
in the Subscription Agreement (a "Lender Prohibition"), the Company shall
continue to have the right to repurchase such Management Stock, but the closing
of the repurchase by the Company of any remaining unrepurchased Management Stock
shall be delayed until first date on which the Company has sufficient capital to
purchase lawfully such Management Stock or until any such Lender Prohibition is
no longer applicable (the "Delayed Closing Date"). In the event of any such
delay, the Company will be obligated to pay, on the Delayed Closing Date,
interest on the purchase price (as such purchase price may be adjusted as of the
payment date pursuant to Section 2.3(d) hereof) for such Management Stock, at a
floating rate equal to the Base Rate, from the 120th day following the
applicable Termination Date, until such Delayed Closing Date. Until such Delayed
Closing Date, the holders of any shares of Management Stock to be repurchased on
such Delayed Closing Date shall retain all rights of Management Stockholders
hereunder, except that if the Company's call right arises under Section 2.1
hereof, such holders shall have only the rights of stockholders under the
Delaware General Corporation law, as amended at the time of reference thereto.
Notwithstanding the foregoing provisions of this Section 2.3(b), in the event
that such Delayed Closing Date does not occur within 90 days following the
applicable Termination Date, or at such later time as may be required by Section
2.3(d), the Company shall deliver written notice of the same to each Management
Stockholder other than the Terminated Manager and each such Management
Stockholder may elect by delivery of written notice to the Company to repurchase
such Management Stock. Any such repurchase by the Management Stockholders shall
be completed in accordance with the provisions of Section 2.3(a) within 30 days
following delivery of such
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notice. In the event that such Management Stockholders fail to complete such
repurchase of Management Stock by the end of such 30 day period, then (i) the
call rights of such Management Stockholders with respect to such Management
Stock shall terminate and (ii) such Management Stock shall once again be subject
to the call rights of the Company pursuant to Section 2.3(a).
(c) Notwithstanding the foregoing, the Company shall be entitled to
complete the repurchase of any shares of Management Stock that the Company is
entitled to repurchase pursuant to this Section 2 other than the purchase of
shares under Section 2.1(a) hereof (as to which the Company or the purchasing
Management Stockholders have elected the special purchase option provided for in
Section 2.3(d)) by delivering to the appropriate Terminated Manager or his
Personal Representative or Family Transferees (A) a check for that portion of
the purchase price which is equal to the Minimum Cash Amount (as defined below)
and (B) a promissory note for the balance of the purchase price (including any
interest accrued on such purchase price pursuant to paragraph (b) above). Each
such promissory note shall (x) bear interest at a floating rate equal to the
Base Rate, and (y) provide for the payment of the principal evidenced thereby in
three equal annual installments commencing one year after such repurchase, and
(z) be subordinated to the Company's indebtedness to its lenders on terms
satisfactory to such lenders. For purposes of this Section 2.3(c), the term
"Minimum Cash Amount" shall mean one quarter of the total purchase price due
with respect to such Management Stock except in the case of Management Stock
initially held by Nancy Bent, which shall have a Minimum Cash Amount equal to
the total purchase price due with respect to such Management Stock.
(d) In the case of a purchase of shares under Section 2.1)(a), and subject
to Section 2.3(b), the purchase price may, at the option of the Company, or the
purchasing Management Stockholders, as applicable, be payable in full, without
interest, on the earliest of (i) the effective date of any Public Sale or (ii)
the effective date of any sale of the Company (whether by merger, consolidation,
sale of all or substantially all of the Company's or of the assets of the
Subsidiaries, or sale of all of the outstanding shares of Stock) or (iii) July
7, 2005. If payment is required prior to July 7, 2005 due to the occurrence of
(a) a Public Sale or (b) a sale of the Company, (either of the occurrences
specified in subparagraph (a) or subparagraph (b) of this sentence are hereafter
referred to as a "Triggering Event") the purchase price shall be redetermined as
of the date of the Triggering Event pursuant to the formula set forth in Section
2.l(a). In such event, the Terminated Manager, the Terminated Manager's Personal
Representative and Family Transferees shall deliver to the Company, or the
purchasing Management Stockholders, as applicable, within 30 days after delivery
of the Exercise Notice referred to in Section 2.3(a), duly endorsed stock
certificates for the shares of Management Stock being repurchased by the
Company, or the purchasing Management Stockholders, as applicable, against
receipt of such Person's promissory note containing the terms set forth in the
preceding sentence. The promissory note may state the amount due as the figure
representing the lower of (i) four hundred fifty-eight dollars and 52/100
($458.52) per share reduced by Book Value Decrease, if any, and (ii) the Market
Value Per Share, as of the Termination Date multiplied in either case by the
number of shares of Management Stock subject to repurchase under Section 2.1(a),
provided that the note expressly states that the purchase price is subject to
redetermination upon the occurrence of a Triggering Event based on the lowest of
(i) four hundred fifty-eight dollars and 52/100 ($458.52) per share, reduced by
Book Value Decrease, if any, (ii) the Market
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Value Per Share determined as of the applicable Termination Date and (iii) the
Market Value Per Share determined as of the date of the Triggering Event.
2.4. REPURCHASE OF STOCK HELD BY FAMILY TRANSFEREES. The repurchase
provisions set forth of this Section 2 shall bind and apply to each Manager's
Family Transferees and all Management Stock transferred to such Family
transferees pursuant to Section 3 hereof, and upon termination of such Manager's
employment or other engagement with the Company or the death or Disability of
such manager, all Management Stock so Transferred shall be subject to repurchase
as provided in this Section 2.
2.5. PRIORITY OF REPURCHASES. In the event that (a) any Terminated Manager
has transferred any or all of his shares of his shares of Management Stock to a
Family Transferee and (b) such shares of Management Stock are subject to
repurchase pursuant to this Section 2, the Company shall repurchase the shares
of Management Stock it is entitled to repurchase pursuant to this Section 2 from
such Terminated Manager and the Family Transferees of such Terminated Manager
PRO RATA in accordance with the number of shares of Management Stock held by
such Terminated Manager and each such Family Transferee. The repurchase price
for the shares of Management Stock so repurchased shall be payable to such
Terminated Manager and such Terminated Manager's Family Transferees PRO rata,
both as to the portion of the purchase price evidenced by a check and that
portion evidenced by a promissory note (in accordance with Section 2.3 above),
in accordance with the numbers of repurchased shares of Management Stock held by
each such Person.
2.6 RIGHT OF FLEET INSTITUTIONAL STOCKHOLDERS TO APPROVE REPURCHASE OF
MANAGEMENT STOCK. Notwithstanding anything to the contrary, the Company's
exercise of its call rights pursuant to this Section 2 shall be subject to the
prior Consent of the Fleet Institutional Stockholders.
Section 3. RESTRICTIONS ON TRANSFER OF SHARES.
3.1 TRANSFER. No Stockholder will sell, assign, pledge or otherwise
transfer (a "Transfer") any interest in any Restricted Securities, either
voluntarily or involuntarily, by operation of law or otherwise, except (a) in
the case of any Institutional Stockholder (other than Bates) in compliance with
the provisions of Sections 3.2, 3.3, 3.4, and 3.5 hereof and the requirements of
any applicable federal or state securities laws, (b) in the case of any of the
Other Stockholders and Bates: (i) to such Stockholder's Family Members, provided
that such Stockholder has retained the right to exercise all voting rights
attributable to the Restricted Securities so transferred, (ii) to such
Stockholder's Personal Representative, or (iii) to the Company pursuant to the
terms of this Agreement or with the prior Consent of the Fleet Institutional
Stockholders, (c) pursuant to a Public Sale or an Approved Sale, or (d)
transfers of the Institutional Stock among the Institutional Stockholders or (d)
a transfer of up to a total of 1,304 shares of stock by Ross B. George and/or
Joseph L. Sylvia to employees of the Company within 30 days from the date of
this Agreement (collectively, "Permitted Transfers"); PROVIDED that (x) the
restrictions contained in this Section 3.1 will continue to be applicable to the
Restricted Securities after any such Permitted Transfer pursuant to clause (a),
(b), (c) or (d)
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above other than a Permitted Transfer to the Company and (y) the transferee of
such Restricted Securities pursuant to this Section 3.1 above shall have
executed and delivered an Instrument of Accession as a condition precedent to
the transfer thereof.
3.2 FIRST RIGHT OF PURCHASE. Any Institutional Stockholder (other than
Bates) may Transfer any interest in any Restricted Securities to any transferee
PROVIDED that any such Transfer shall be made in accordance with the provisions
of this Section 3.2 and Sections 3.3 and 3.4 and in compliance with the
requirements any applicable federal or state securities laws. At least 30 days
prior to making any such Transfer of any Institutional Stock, the transferring
Institutional Stockholder (the "Transferring Stockholder") will deliver a
written notice (the "Offer Notice") to each of the other Institutional
Stockholders. The Offer Notice will disclose in reasonable detail the proposed
number of shares of Restricted Securities to be transferred, the type of such
Restricted Securities, the proposed price, terms and conditions of the Transfer
and the identity of the transferee. Any Institutional Stockholder may elect (by
itself or through an Affiliate of such Institutional Stockholder) to purchase
all of the shares of any Restricted Securities specified in any Offer Notice
given by a Transferring Stockholder at the price and on the terms specified
therein by written notice of such election to the Transferring Stockholder
within 30 days after delivery of such Offer Notice (the "Institution Election
Period"). If any of the Institutional Stockholders elects to purchase all of
such Restricted Securities, the Transfer of the Restricted Securities will be
consummated within 15 days after the expiration of the Institution Election
Period. If more than one Institutional Stockholder elects to purchase all of the
Restricted Securities to be transferred, each Institutional Stockholder electing
to purchase such Restricted Securities will be entitled to purchase a PRO RATA
portion (based upon the respective numbers of shares of Restricted Securities
then held by such Institutional Stockholders (on a fully diluted basis)) of the
Restricted Securities proposed to be transferred. If none of the Institutional
Stockholders elects to purchase all of the Restricted Securities being offered,
the Transferring Stockholder may, within 90 days after the expiration of the
Institution Election Period, Transfer the Restricted Securities specified in the
Offer Notice to one or more third parties specified in the Offer Notice at a
price and on terms no more favorable to the transferees than the price and terms
offered to the Institutional Stockholders in the Offer Notice, PROVIDED that no
such Transfer may be completed except in compliance with Section 3.3 and unless
each of such transferees shall have executed and delivered an Instrument of
Accession as a condition precedent to the transfer thereof. If the Transferring
Stockholder fails to consummate such transfer within the 90 day period after the
expiration of the Institution Election Period, any subsequent proposed Transfer
of the Restricted Securities shall be once again subject to the provisions of
this Section 3.2.
3.3. PARTICIPATION RIGHTS. (a) In the event that the other Institutional
Stockholders fail to purchase the Restricted Securities specified in the Offer
Notice, the Transferring Stockholder shall offer, by written notice (the
"Tag-along Notice") each of the other Institutional Stockholders and each of the
Other Stockholders (the "Non-Transferring Stockholders") the opportunity to
participate in such sale, subject to the provisions of subparagraph (b) of this
Section 3.3. Each of the Non-Transferring Stockholders may elect to participate
in the contemplated sale by delivering written notice to the Transferring
Stockholder within 15 days after receipt of the Tag-along Notice. If any of the
Non-Transferring Stockholders elects to
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participate in such sale (the "Tag-along Sale"), each of the Transferring
Stockholder and such participating Non-Transferring Stockholders will be
entitled to sell, in the contemplated sale, at the same price and on the same
terms, a number of shares of Restricted Securities of the class proposed to be
sold equal to the product of (i) the fraction, the numerator of which is the
number of shares of Restricted Securities (on a fully-diluted basis, treating
all classes of Restricted Securities as a single class) held by such Person, and
the denominator of which is the aggregate number of shares of Restricted
Securities (on a fully-diluted basis, treating all classes of Restricted
Securities as a single class) owned by the Transferring Stockholder and such
participating Non-Transferring Stockholders, MULTIPLIED BY (ii) the number of
shares of Restricted Securities (on a fully diluted basis) to be sold in the
contemplated sale.
For example, if the notice from the Transferring Stockholder contemplated a
sale of 100 shares of Restricted Securities by the Transferring Stockholder and
the Transferring Stockholder at such time owns 300 shares of Restricted
Securities, and if one Non-Transferring Stockholder elects to participate in
such sale and such Non-Transferring Stockholder owns 200 shares of Restricted
Securities (on a fully-diluted basis), such Transferring Stockholder would be
entitled to sell 60 shares (300/500 x 100 shares) and such Non-Transferring
Stockholder would be entitled to sell 40 shares (200/500 x 100 shares).
(b) The Transferring Stockholder will use its best efforts to obtain the
agreement of the prospective transferee(s) to the participation of the
Non-Transferring Stockholders in any contemplated sale and will not transfer any
of its Restricted Securities to the prospective transferee(s) if the prospective
transferee(s) declines to allow the participation of the Non-Transferring
Stockholders on the terms specified herein.
(c) The Non-Transferring Stockholders electing to participate in the
Tag-Along Sale shall bear their PRO RATA share of transaction costs incurred in
connection with such Tag-Along Sale to the extent such costs would otherwise be
borne by the Transferring Stockholder. To the extent a Non-Transferring
Stockholder(s) elects not to participate in any Tag-Along Sale, the Transferring
Stockholder may sell additional shares of Institutional Stock in an amount equal
to the aggregate number of shares of Institutional Stock such Non-Transferring
Stockholder(s) would otherwise be entitled to sell pursuant to such Tag-Along
Sale.
3.4. EXEMPTED TRANSFERS. Notwithstanding any provision to the contrary, (a)
any Institutional Stockholder may Transfer shares of Institutional Stock to a
successor corporation or other successor entity as a result of a merger or
consolidation with, or a sale of all or substantially all of the assets of, such
Institutional Stockholder or a transfer to one or more of its Affiliates or, if
a general or limited partnership, in connection with the liquidation and
dissolution of such partnership, without the requirement of complying with
Sections 3.2 and 3.3 hereof and (b) any Institutional Stockholder may Transfer
shares of Institutional Stock to the extent required by governmental rule, law
or regulation, or any directive or order of any governmental authority without
the requirement of complying with Section 3.3 hereof. Any transferee of shares
pursuant to this Section 3.4 shall become a party to this Agreement and execute
an Instrument of Accession.
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<PAGE> 16
Section 3.5. REGULATORY COMPLIANCE COOPERATION.
(i) In the event that FVR, FEP, or any other Institutional Stockholder that
is a Small Business Investment Company within the meaning of the Small Business
Investment Act of 1958, as amended or is subject to regulation under the Bank
Holding Company Act of 1956, as amended (a "Regulated Holder") determines that
it has a Regulatory Problem (as defined below), such Regulated Holder shall have
the right to transfer its Stock without regard to any restriction on transfer
set forth in this Agreement other than the securities laws restrictions set
forth in Section 3.1 (provided that the transferee agrees to become a party to
this Agreement and executes an Instrument of Accession), and the Company shall
take all such actions as are reasonably requested by such Regulated Holder in
order to (a) effectuate and facilitate any transfer by such Regulated Holder of
any securities of the Company then held by such Regulated Holder to any Person
designated by such Regulated Holder, (b) permit such Regulated Holder (or any of
its affiliates) to exchange all or any portion of any voting security then held
by it on a share-for-share basis for shares of a nonvoting security of the
Company, which nonvoting security shall be identical in all respects to the
voting security exchanged for it, except that it shall be nonvoting and shall be
convertible into a voting security on such terms as are requested by such
Regulated Holder in light of regulatory considerations then prevailing, and (c)
amend this Agreement, the Company's Charter, the Company's bylaws and related
agreements and instruments to effectuate and reflect the foregoing. The parties
to this Agreement agree to vote their securities in favor of such amendments and
actions. The Company shall give reasonable prior notice to each Regulated
Holder, if such Regulated Holder does not otherwise receive notice thereof
hereunder, of any repurchase or redemption of Stock, or other corporate
transaction, that would increase such Regulated Holder's percentage ownership of
the Stock or any class thereof.
(ii) For purposes of this Agreement, a "Regulatory Problem" means any set
of facts or circumstances wherein it has been asserted by any governmental
regulatory agency (or any Regulated Holder believes that there is a substantial
risk of such assertion) that such Regulated Holder is not entitled to hold, or
exercise any significant right with respect to, the Stock.
Section 4. CERTAIN REGISTRATION RIGHTS.
Each of the parties to this Agreement, contemporaneously with the execution
and delivery hereof, has executed and delivered the Registration Rights
Agreement.
Section 5. SALE OF THE COMPANY.
5.1 CONSENT OF OTHER STOCKHOLDERS. In the event of (i) the sale of the
Company (whether by merger, consolidation, sale of all or substantially all of
the Company's assets or of the assets of the Subsidiaries, or sale of all of the
outstanding shares of Stock) to a third party which is not an Affiliate of a
Fleet Institutional Stockholder or (ii) the offer by the Company to repurchase
shares of Stock held by each Stockholder on a PRO RATA basis, is approved by the
Consent of the Fleet Institutional Stockholders (an "Approved Sale"), each of
the Remaining Institutional Stockholders and the Other Stockholders hereby
waives, to the extent permitted by applicable law, all rights to object to or
dissent from such Approved Sale of the Company and hereby agrees that each will
raise no objections against such Approved Sale of the Company.
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<PAGE> 17
Each of the Remaining Institutional Stockholders and the Other Stockholders
agree to vote their respective Restricted Securities entitled to vote to approve
the terms of any such Approved Sale and any matters ancillary thereto as may be
necessary in the judgment of the Fleet Institutional Stockholders, acting by
Consent of the Fleet Institutional Stockholders, to effect such Approved Sale.
If the Approved Sale of the Company is structured as a sale of stock, each of
the Remaining Institutional Stockholders and the Other Stockholders agree to
sell all of their respective shares of Stock (and any options, warrants
including the Warrants, or other rights to acquire any Stock) on the terms and
conditions approved by Consent of the Fleet Institutional Stockholders. The sale
provisions set forth in this Section 5.1 shall bind and apply to each Family
Transferee and all Stock transferred to such Family Transferees pursuant to
Section 3 hereof.
5.2. OBLIGATIONS OF STOCKHOLDERS.
(a) The Company, the Remaining Institutional Stockholders and the Other
Stockholders hereby agree to cooperate fully in any Approved Sale and not to
take any action prejudicial to or inconsistent with such sale. Without limiting
the generality of the foregoing, the Remaining Institutional Stockholders and
the Other Stockholders will, upon request, deliver their stock (together with
executed instruments of transfer) in escrow (pending receipt of the purchase
price therefor) to counsel for the Company (selected by the Fleet Institutional
Stockholders) in such sale.
(b) The Company shall cause its officers, employees, agents, contractors
and others under its control to cooperate in any proposed sale pursuant to this
Section 5.1 and not to take any action which might impede any such sale. Any
resignation or threat thereof prior to closing of such Approved Sale by any
Manager shall be regarded as a breach of this provision. Pending the completion
of any proposed sale, the Company shall operate only in the ordinary course and
shall maintain all existing business relationships in good standing.
5.3 CONDITIONS. The obligations of each Remaining Institutional Stockholder
and each Other Stockholder with respect to the Approved Sale of the Company are
subject to the satisfaction of the condition that, upon the consummation of the
Approved Sale, each Remaining Institutional Stockholder and each Other
Stockholder will receive that form and amount of consideration per share of
outstanding Stock given to all other holders of Stock (in their capacity as
stockholders) pursuant to the Company's Charter and, if any holder of Stock is
given an option as to the form and amount of consideration to be received, each
Remaining Institutional Stockholder and each Other Stockholder will be given the
same option. In addition, in connection with any such Approved Sale, each
Remaining Institutional Stockholder and each Other Stockholder shall share all
indemnifications, escrows and other liabilities incurred in connection with any
such Approved Sale on a pro rata basis with all Stockholders based upon their
relative holdings of Stock and such respective liability shall, except as
provided in the next sentence, be in all events limited to an amount equal to
the consideration received by each Stockholder pursuant to such Approved Sale.
In the case of liabilities relating to knowing or intentional misrepresentation,
it shall not be required that the liability of each Stockholder be
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<PAGE> 18
limited to an amount equal to the consideration received by each Stockholder
pursuant to such Approved Sale.
Section 6. LIMITED PRE-EMPTIVE RIGHTS.
6.1. ANTI-DILUTION PROVISION. Except for the issuance of Stock (or
securities convertible into or containing options or rights to acquire shares of
Stock) (i) pursuant to a Public Sale, (ii) pursuant to the Warrants, (iii)
pursuant to the exercise of stock options issued pursuant to the Employee Stock
Option Plan or exercise of the Executive Stock Options, (iv) upon conversion of
shares of Class B Common Stock of the Company to Class A Common Stock of the
Company pursuant to the Company's Charter, and (v) upon the exercise of any
outstanding warrants or options or the conversion of any outstanding convertible
securities the issuance of which does not violate the provisions of this Section
6, if the Company authorizes the issuance and sale of any shares of Stock or any
securities convertible into or containing options or rights to acquire any
shares of Stock (other than as a dividend on the outstanding Stock), the Company
will first offer to sell to each of the Stockholders a portion of such
securities equal to the percentage determined by dividing (A) the sum of (1) the
number of shares of Stock held by such Stockholder and (2) the number of shares
of Stock then purchasable by such Stockholder upon the exercise of all
outstanding options and warrants and the conversion of all outstanding
convertible securities held by such Stockholder, by (B) the sum of (x) the
number of shares of Stock held by all Stockholders and (y) the number of shares
of Stock then purchasable upon exercise of all outstanding options and warrants
and the conversion of all outstanding convertible securities held by all
Stockholders. Each Stockholder will be entitled to purchase all or part of such
stock or securities at the same price and on the same terms as such stock or
securities are to be offered to any other Persons. Each Institutional
Stockholder may assign its rights and obligations under this Section 6 to an
Affiliate of such Institutional Stockholder.
6.2 STOCKHOLDERS' EXERCISE OF RIGHT. Each Stockholder must exercise such
Stockholder's purchase rights hereunder within 30 days after receipt of written
notice from the Company describing in reasonable detail the stock or securities
being offered, the purchase price thereof, the payment terms and such
Stockholder's percentage allotment. If all of the stock or securities offered to
the Stockholders are not fully subscribed by the Stockholders, the stock or
securities which are not so subscribed for will be reoffered to the Stockholders
purchasing their full allotment upon the terms set forth in this Section 6,
except that such Stockholders must exercise their purchase rights within 15 days
after receipt of such reoffer.
6.3 COMPANY'S EXERCISE OF RIGHT. Upon the expiration of the offering
periods described above, the Company will be free to sell such stock or
securities which the Stockholders have not elected to purchase during the 90
days following such expiration on terms and conditions no more favorable to the
purchasers thereof than those offered to the Stockholders. Any stock or
securities offered or sold by the Company after such 90-day period must be
reoffered to the Stockholders pursuant to the terms of this Section 6.
6.4 COMPLIANCE WITH SUBSCRIPTION AGREEMENT AND APPLICABLE LAW. The Company
and each Stockholder hereby acknowledges and agrees that, notwithstanding
anything contained
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<PAGE> 19
in this Section 6, the Company will not issue or sell any shares of Stock or any
securities convertible into or containing options or rights to acquire any
shares of Stock except in accordance with the provisions of the Subscription
Agreement, the Securities Act and applicable state blue sky laws and except to
purchasers who execute Instruments of Accession in accordance with Section 13
hereof.
Section 7. BOARDS OF DIRECTORS.
7.1 BOARDS OF DIRECTORS: VOTING AGREEMENTS; ATTENDANCE RIGHTS.
(a) In any and all elections of directors of the Company and any Principal
Subsidiary (whether at a meeting or by written consent in lieu of a meeting),
each Stockholder shall vote, or cause to be voted, or cause such Stockholder's
designees as directors to vote, all shares of Stock or stock of any Subsidiary
owned by such Stockholder or over which such Stockholder has voting control so
as to fix the number of directors of each of the Company and each Principal
Subsidiary at five, and to nominate and elect such five directors of each of the
Company and each Principal Subsidiary as follows:
(i) One individual designated by Chisholm;
(ii) One individual designated by FEP;
(iii) One individual designated by FVR; and
(iv) Ross B. George and Joseph L. Sylvia during the period of their
employment by the Company and, upon their resignation or termination of their
employment for any reason, two individuals designated by the Company's then
current Chief Executive Officer (the "Company's CEO").
If Chisholm, FEP, FVR or the Company's CEO, as applicable, choose not to
designate one or more directors as provided above, the number of directors of
each of the Company and each Principal Subsidiary shall be reduced by one, two,
three, four or five, as applicable, until such time as Chisholm, FEP, FVR or the
Company's CEO, as applicable, exercise their or his rights as provided above, at
which time the number of directors of each of the Company and each Principal
Subsidiary shall be increased by one, two, or three, four or five, as
applicable.
(b) If any vacancy shall occur in the Board of Directors of the Company or
of any Principal Subsidiary as a result of death, disability, resignation or any
other termination of a director, the replacement for such vacating director
shall be designated by the Person who, pursuant to Section 7.1(a) above,
originally designated such vacating director. Each Person entitled to designate
a director pursuant to this Section 7 shall also be entitled to designate the
removal of such director with or without cause and a replacement for any
director so removed. Each Stockholder hereby agrees to vote or cause to be voted
or cause such Stockholder's designees as directors to vote all shares of Stock
owned by such Stockholder so as to comply with; this Section 7.1(b).
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<PAGE> 20
(c) Pacific and First Union shall each have the right to designate a
representative to attend all meetings of the Board of Directors in a nonvoting
observer capacity, to receive a notice of such meetings and to receive the
information provided by the Company to the Board of Directors; provided,
however, that the Company may require as a condition precedent to the rights
under this Section 7.1(c) that each person proposing to attend any meeting of
the Board of Directors and each person to have access to any of the information
provided by the Company to the Board of Directors shall agree to hold in
confidence and trust and to act in a fiduciary manner with respect to all
information so received during such meetings or otherwise and provided, further,
that the Company reserves the right not to provide information and to exclude
such representatives from any meeting or portion thereof if delivery of such
information or attendance at such meeting by such representatives would
adversely affect the attorney-client privilege between the Company and its
counsel. The right of First Union or Pacific to designate a representative
hereunder shall terminate as to First Union or Pacific, as the case may be, upon
the dissolution or liquidation of the designating party.
7.2 PROXY. EACH STOCKHOLDER HEREBY GRANTS TO THE COMPANY AN IRREVOCABLE
PROXY, COUPLED WITH AN INTEREST, TO VOTE ALL SHARES OF STOCK TO THE EXTENT
NECESSARY TO CARRY OUT THE PROVISIONS OF THIS SECTION 7 IN THE EVENT OF ANY
BREACH BY SUCH STOCKHOLDER OF ITS OBLIGATIONS UNDER THE VOTING AGREEMENT
CONTAINED HEREIN.
7.3 ACTION BY STOCKHOLDERS. Each Stockholder will not vote any shares owned
by such Stockholder or over which such Stockholder has voting control or take
any action by written consent, or take any other action as a stockholder of the
Company, to circumvent the voting arrangements required by this Section 7.
Without limiting the generality of the foregoing, each Stockholder agrees not to
(i) vote any shares owned by such Stockholder or over which such Stockholder has
voting control, or take any other action as a stockholder of the Company, to
approve any corporate action or transaction by the Company not previously
approved by the Board of Directors of the Company in accordance with this
SECTION 7 or (ii) commence or maintain any shareholder's derivative suit
challenging any action or transaction approved by the Company's Board of
Directors. The limitation set forth in Section 7.3(ii) shall not apply to a
shareholder's derivative suit which involves solely allegations of intentional
fraud or allegations that any such action or transaction was made in violation
of this Agreement or the Subscription Agreement.
7.4 DELEGATION OF VOTING POWER. By execution of this Agreement, Bates
hereby delegates to each of the Fleet Institutional Stockholders, acting by
Consent of the Fleet Institutional Stockholders, all right, power, and authority
to vote or cause to be voted all shares of Stock owned by such Stockholder and
to exercise any and all voting and consent rights attributable to such
Stockholder under this Agreement as such Fleet Institutional Stockholders shall
determine in their sole discretion, and, in any event, agrees to vote or cause
to be voted all shares of such stock owned by such Stockholder and to exercise
any such voting and consent rights attributable to such Stockholder under this
Agreement as such Fleet Institutional Stockholders shall direct in their sole
discretion.
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<PAGE> 21
Section 8. LEGEND. So long as any shares of Restricted Securities are
subject to this Agreement, all certificates or instruments representing the
Restricted Securities will have imprinted on the following legend:
"The [shares] [warrant] evidenced by this certificate have not been
registered under the Securities Act of 1933, as amended. No transfer, sale or
other disposition of these [shares] [warrants] may be made unless a Registration
Statement with respect to these [shares] [warrants] has become effective under
said Act, or Simonds Industries Inc. (the "Company") has been furnished with an
opinion of counsel reasonably satisfactory to the Company that such registration
is not required.
The [shares] [warrant] represented by this certificate are subject to the
terms of a certain Stockholder Agreement, dated as of July 7, 1998, among the
issuer of this [certificate] [warrant] and certain investors. The Stockholder
Agreement contains certain restrictive provisions relating to the [voting and
transfer of shares of the stock represented hereby] [the transfer of the warrant
represented hereby and the voting and transfer of the shares of stock issuable
upon the exercise of the warrant represented hereby]. A copy of the Stockholder
Agreement is on file at the Company's principle offices. Upon written request to
the Company's Secretary, a copy of the Stockholder Agreement will be provided
without charge to appropriately interested persons."
Section 9. AMENDMENT AND WAIVER. No modification, amendment or waiver of
any provision of this Agreement will be effective against the Company or the
Stockholders unless such modification, amendment or waiver is approved in
writing by Consent of the Institutional Stockholders and the holders of at least
51% of the total number of outstanding shares of Management Stock.
Section 10. SEVERABILITY. Whenever possible, each provision of this
Agreement will be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be invalid,
illegal or unenforceable in any respect under any applicable law, but if any
provisions of this Agreement is held to be invalid, illegal or unenforceable in
any respect under any applicable law or rule in any jurisdiction, such
invalidity, illegality or unenforceability will not affect any other provision
or any other jurisdiction but this Agreement will be reformed, construed and
enforced in such jurisdiction as if such invalid, illegal or unenforceable
provision had never been contained herein.
Section 11. ENTIRE AGREEMENT. Except as otherwise expressly set forth
herein and in the Related Agreements, this document embodies the complete
agreement and understanding among the parties hereto with respect to the subject
matter hereof and thereof and supersedes and preempts any prior understandings,
agreements or representation by or among the parties, written or oral, which may
have related to the subject matter hereof in any way.
Section 12. SUCCESSORS AND ASSIGNS. This Agreement will bind and inure to
the benefit of and be enforceable by (i) the company and its successors and
assigns and (ii) the Stockholders and any subsequent holders of Restricted
Securities and the respective successors and assigns of each of them so long as
they hold Restricted Securities.
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<PAGE> 22
Section 13. NEW STOCKHOLDERS. The Company will not issue any shares of
capital stock or enter into any commitment, conditional or otherwise, to do so
unless the holder or transferee of such stock or commitment shall have first
executed an Instrument of Accession if such Person is not already a party to
this Agreement.
Section 14. COUNTERPARTS. This Agreement may be executed in separate
counterparts each of which will be an original and all of which taken together
will constitute one and the same agreement.
Section 15. REMEDIES. The Stockholders will be entitled to enforce their
rights under this Agreement specifically (without posting a bond or other
security), to recover damages by reason of any breach of any provision of this
Agreement and to exercise all other rights existing in their favor. The parties
hereto agree and acknowledge that money damages may not be an adequate remedy
for any breach of the provisions of this Agreement and that any Stockholder may
in its sole discretion apply to any court of law or equity of competent
jurisdiction for specific performance and/or injunctive relief in order to
enforce or prevent any violation of the provisions of this Agreement. In the
event of any dispute involving the terms of this Agreement, the prevailing party
shall be entitled to collect reasonable fees and expenses incurred by the
prevailing party in connection with such dispute from the other parties to such
dispute.
Section 16. EMPLOYMENT. Nothing contained in this Agreement is intended to
create for any Management Stockholder who is an employee of the Company or any
of its Subsidiaries a right to continue employment with the Company or
employment in the same position or on the same terms as those currently in
effect.
Section 17. NOTICES. Any notice provided for in this Agreement will be in
writing and will be deemed properly delivered if either personally delivered or
mailed certified or registered mail, return receipt requested, postage prepaid
to the recipient at the address listed for such Stockholder in the stock records
of the Company. The Company agrees to make available to each Stockholder upon
request an address list of all Stockholders to ensure correct delivery of all
notices hereunder.
Section 18. TERMINATION. This Agreement will terminate upon the earliest to
occur of (i) the completion of the distribution of the proceeds of an Approved
Sale under Section 5.1(i) to the Stockholders, (ii) the date on which no
Institutional Stock remains outstanding, (iii) the completion of any voluntary
or involuntary liquidation or dissolution of the Company, and (iv) the
completion of any Public Sale resulting in gross proceeds to the Company of at
least $50 million.
Section 19. NO EFFECT UPON LENDING RELATIONSHIPS. Notwithstanding anything
herein to the contrary, nothing contained in this Agreement shall affect, limit
or impair the rights and remedies of Heller or any other lender in their
capacity as a lender(s) to the Company or any of its Subsidiaries pursuant to
any agreement under which the Company or any of its Subsidiaries has borrowed
money.
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<PAGE> 23
Section 19. GOVERNING LAW. ALL QUESTIONS CONCERNING THE CONSTRUCTION,
VALIDITY AND INTERPRETATION OF THIS AGREEMENT WILL BE GOVERNED BY THE LAWS OF
THE STATE OF DELAWARE.
Section 20. DESCRIPTIVE HEADINGS. The descriptive headings of this
Agreement are inserted for convenience only and do not constitute a part of this
Agreement.
SIGNATURES APPEAR ON THE NEXT PAGE
<PAGE> 24
IN WITNESS WHEREOF, the parties hereto have executed this Amended and
Restated Stockholder Agreement on the day and year first above written.
THE COMPANY:
------------
SIMONDS INDUSTRIES, INC.
By:
----------------------------------------
Title:
-------------------------------------
INSTITUTIONAL STOCKHOLDERS:
---------------------------
FLEET VENTURE RESOURCES, INC.
By:
----------------------------------------
Title:
-------------------------------------
Address: 50 Kennedy Plaza, Suite 1200
Providence, RI 02903
Attention: Habib Y. Gorgi, President
FLEET EQUITY PARTNERS VI, L.P.
By: FLEET GROWTH RESOURCES II,
INC., its general partner
By:
----------------------------------------
Title:
-------------------------------------
Address: 50 Kennedy Plaza, Suite 1200
Providence, RI 02903
Attention: Habib Y. Gorgi, President
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<PAGE> 25
CHISHOLM PARTNERS III, L.P.
By: Silverado III, L.P., Its General Partner
By: Silverado III Corp., Its General Partner
By:
-----------------------------------------
Title:
--------------------------------------
Address: 50 Kennedy Plaza, Suite 1200
Providence, RI 02903
Attention: Habib Y. Gorgi, President
--------------------------------------------
Donald E. Bates
Address:
------------------------------------
------------------------------------
KENNEDY PLAZA PARTNERS
By:
-----------------------------------------
Address: 50 Kennedy Plaza, Suite 1200
Providence, RI 02903
Attention: Habib Y. Gorgi,
Managing General Partner
PRIVATE MARKET FUND, L.P.
By: Pacific Corporate Capital, Inc.,
Its General partner
By:
-----------------------------------------
FIRST UNION INVESTORS, INC.
By:
-----------------------------------------
Title:
--------------------------------------
HELLER FINANCIAL, INC.
By:
-----------------------------------------
Title:
--------------------------------------
[MANAGERS]
----------
[Signatures appear on the next page.]
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<PAGE> 26
MANAGERS
--------
-------------------------------------------
Signature
Print Name:
--------------------------------
Address:
-----------------------------------
-----------------------------------
-----------------------------------
-------------------------------------------
Signature
Print Name:
--------------------------------
Address:
-----------------------------------
-----------------------------------
-----------------------------------
Signature
Print Name:
Address:
-------------------------------------------
Signature
Print Name:
--------------------------------
Address:
-----------------------------------
-----------------------------------
-----------------------------------
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<PAGE> 27
Schedule 1
TO STOCKHOLDER AGREEMENT
------------------------
Instrument of Accession
Reference is made to that certain Stockholder Agreement dated as of
_______________, 1998, a copy of which is attached hereto (as amended and in
effect from time to time, the "Stockholder Agreement"), among Simonds
Industries, Inc., a Delaware corporation (the "Company"), and the Stockholders
of the Company (as defined therein) and the holders of certain warrants of the
Company.
The undersigned, _________________, in order to become the owner or holder
of _____ shares (the "Shares") of Stock of the Company, hereby agrees that by
the undersigned's execution hereof (a) the undersigned is an [Institutional]
[Other] Stockholder party to the Stockholder Agreement subject to all of the
restrictions and conditions set forth in the Stockholder Agreement, and (b) all
of the Shares (and any and all shares of stock of the Company issued in respect
thereof) constitute [Institutional] [Other Stock] [Restricted Securities]
subject to all the restrictions and conditions applicable to [Institutional]
[Other Stock] [Restricted Securities] as set forth in the Stockholder Agreement.
This Instrument of Accession shall take effect and shall become a part of said
Stockholder Agreement immediately upon execution.
Executed as of the date set forth below under the laws of the State of
Delaware.
Signature:
-------------------------------
Address:
--------------------------------
----------------------------------------
----------------------------------------
Date:
-----------------------------------
Accepted:
SIMONDS INDUSTRIES INC.
By:
------------------------------------
Date:
----------------------------------
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<PAGE> 1
Exhibit 2.2
STOCK PURCHASE AGREEMENT
This Agreement ("Agreement") is entered into effective August 1, 1997,
by and among Simonds Holding Company, Inc., a Delaware corporation ("Buyer"),
Armstrong Manufacturing Company, an Oregon corporation ("Company") and Fredric
B. Andrianoff, a resident of Portland, Oregon ("Seller").
WHEREAS, the Company presently has authorized five thousand (5,000)
common shares of stock, ten dollars ($10.00) par value (the "Common Shares"),
and one hundred fifty (150) preferred shares of stock, one hundred dollars
($100.00) par value (the "Preferred Shares");
WHEREAS, the Company presently has issued and outstanding no (000)
Preferred Shares and six hundred ninety-seven (697) Common Shares, referred to
herein as the "Shares," all of which are issued to and owned by Seller, and
WHEREAS, said Shares are the only issued and outstanding capital stock
of the Company; and
WHEREAS, Buyer desires to purchase from Seller and Seller desires to
sell to Buyer all of the Shares owned by Seller on the terms and subject to the
conditions set forth herein.
NOW THEREFORE, IT IS AGREED AS FOLLOWS:
SECTION 1.0. PURCHASE OF SHARES.
1.1 PURCHASE OF SHARES. Subject to the terms and conditions set
forth herein, at the Closing (as defined below) Seller will sell all of the
Shares to Buyer and Buyer will purchase all of the Shares, said Shares
constituting one hundred percent (100%) of all of the issued and outstanding
capital stock of the Company as of the Closing.
1.2 PURCHASE PRICE. Buyer will pay to Seller the sum of
US$9,000,000 ("Purchase Price"), in the form of cash or cash equivalent,
allocated as provided in Section 1.4, infra.
1.3 ADJUSTMENTS TO PURCHASE PRICE. Within a reasonable period of
time after Closing, the parties will reasonably agree on Closing Financial
Statements (hereinafter defined). The Purchase Price will be reduced,
dollar-for-dollar, to the extent that Net Worth as represented in the Closing
Financial Statements is less than $3,531,747.30, as represented in June 1997
Financial Statements (hereinafter defined).
1.4 PAYMENT OF PURCHASE PRICE. The Purchase Price will be paid at
Closing, allocable as follows:
(i) the sum of US$8,125,000 in consideration of the
Stock; and
(ii) the sum of US$875,000 in consideration of a certain
Noncompetition Agreement to be executed and delivered at Closing.
<PAGE> 2
Section 2.0. REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND SELLER. As a
material inducement to Buyer to enter into this Agreement and to purchase the
Shares, Seller and the Company, jointly and severally, represent and warrant
that:
2.1 ORGANIZATION AND CORPORATE POWER. The Company is a corporation
duly incorporated and validly existing under the laws of Oregon, and the Company
is qualified to do business in every jurisdiction in which its ownership of
property or conduct of business requires it to qualify. The Company has all
requisite corporate power and authority and all material licenses, permits, and
authorizations necessary to own and operate its properties and to carry on its
business as now conducted. The copies of the Company's charter documents and
bylaws have been furnished to Buyers counsel reflect all amendments made thereto
at any time prior to the date of this Agreement and are correct and complete.
2.2 CAPITAL STOCK AND RELATED MATTERS. The authorized capital
stock and issued and outstanding stock of the Company are as set forth in the
first and second recitals respectively, above. All of the Shares are owned,
beneficially and of record, by Seller and no other stock of the Company is
issued and outstanding. The Company does not have outstanding and has not
agreed, orally or in writing, to issue any stock or securities convertible or
exchangeable for any shares of its stock, nor does it have outstanding nor has
it agreed, orally or in writing, to issue any options or rights to purchase or
otherwise acquire its stock. The Company is not subject to any obligation
(contingent or otherwise) to repurchase or otherwise acquire or retire any
shares of its stock. The Company has not violated any applicable securities laws
or regulations in connection with the offer or sale of its securities other than
violations that have been, or will before the Closing have been, corrected by
post-issuance filings. All of the outstanding shares of the Company's capital
stock are validly issued, fully paid, and nonassessable. Seller has, and upon
purchase thereof, pursuant to the terms of this Agreement Buyer will have, good
and marketable title to the shares, free and clear of all security interests,
liens, encumbrances, or other restrictions or claims, subject only to
restrictions as to marketability imposed by securities laws. Assuming that the
representations in Section 3.6 are true and correct, neither Seller nor the
Company have violated or will violate any applicable securities laws in
connection with the offer or sale of the Shares to Buyer hereunder.
2.3 SUBSIDIARIES. Except as set forth in SCHEDULE 2.3, the Company
does not own or hold any rights to acquire any shares of stock or any other
security or interest in any other corporation or entity.
2.4 CONDUCT OF BUSINESS; LIABILITIES. Except as set forth in
SCHEDULE 2.4, the Company is not in default under, and no condition exists that
with notice or lapse of time would constitute a default of the Company under (i)
any mortgage, loan agreement, evidence of indebtedness, or other instrument
evidencing borrowed money to which the Company is a party or by which the
Company or the properties of the Company are bound or (ii) any judgment, order,
or injunction of any court, arbitrator, or governmental agency that would
reasonably be expected to affect materially and adversely the business,
financial condition, or results of operations of the Company taken as a whole.
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2.5 FINANCIAL STATEMENTS. The unaudited (but independent CPA
reviewed) 1995/1996 balance sheet, income statement and cash flow statement of
the Company as of December 31, 1996, in the form attached to this Agreement as
EXHIBIT 2.5(A) (collectively the "1995/1996 Financial Statements"), fairly
present the financial position of the Company as at December 31, 1996, and have
been prepared in accordance with generally accepted accounting principles,
consistently applied, and in a manner consistent with prior financial statements
of the Company. The unaudited and unreviewed balance and income statement of the
Company as at June 30, 1997, and for the month then ended, in the form attached
hereto as EXHIBIT 2.5(B) ("June, 1997 Financial Statements"), fairly present the
financial position of the Company as at June 30, 1997 and the results of
operations for the one month then ended and have been prepared in accordance
with generally accepted accounting principles consistently applied and in a
manner substantially consistent with the 1995/1996 Financial Statements, except
for differences resulting from normally occurring audit adjustments, including,
but not limited to, income tax and tax accrual adjustments, or as noted in the
June, 1997 Financial Statements or the notes thereto. Except as contemplated by
or permitted under this Agreement, there are no adjustments that would be
required on review of the June, 1997 Financial Statements that would,
individually or in the aggregate, have a material negative effect upon the
Company's reported financial condition.
2.6 NO UNDISCLOSED LIABILITIES. Except for (i) trade liabilities
and trade obligations incurred in the ordinary course of business since June 30,
1997 ("Statement Date"), and (ii) liabilities or obligations described in
SCHEDULE 2.6, neither the Company nor any of the property of the Company is
subject to any material liability or obligation that was required to be included
or adequately reserved against in the June, 1997 Financial Statements or
described in the notes thereto and was not so included, reserved against, or
described. Neither the Company nor Seller has any knowledge of any basis for any
liability of Company, contingent or otherwise, not reflected in the June, 1997
financial Statements or described in the notes thereto.
2.7 ABSENCE OF CERTAIN CHANGES. Except as contemplated or
permitted by this Agreement or as described in SCHEDULE 2.7, since the Statement
Date there has not been:
2.7.1 Any material adverse change in the business,
financial condition, operations, or assets of the Company;
2.7.2 Any damage, destruction, or loss, whether covered by
insurance or not materially adversely affecting the properties or business of
the Company;
2.7.3 Any sale or transfer by the Company of any tangible
or intangible asset other than in the ordinary course or business, any mortgage
or pledge or the creation of any security interest, lien, or encumbrance on any
such asset, or any lease of property, including equipment, other than tax liens
with respect to taxes not yet due and contract rights of customers in inventory;
2.7.4 Any declaration, setting aside, or payment of a
distribution in respect of or the redemption or other repurchase by the Company
of any stock of the Company;
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2.7.5 Any material transaction not in the ordinary course
of business of the Company;
2.7.6 The lapse of any material trademark, assumed name,
trade name, service mark, copyright, or license or any application with respect
to the foregoing;
2.7.7 The grant of any increase in the compensation of
officers or employees (including any such increase pursuant to any bonus,
pension, profit-sharing, or other plan) other than customary increases on a
periodic basis or required by agreement or understanding in the ordinary course
of business and in accordance with past practice;
2.7.8 The discharge or satisfaction of any material lien or
encumbrance or the payment of any material liability other than current
liabilities in the ordinary course of business;
2.7.9 The making of any material loan, advance, or guaranty
to or for the benefit of any person except the creation of accounts receivable
in the ordinary course of business; or
2.7.10 An agreement to do any of the foregoing.
2.8 TITLE AND RELATED MATTERS. Except as set forth in SCHEDULE
2.8, the Company has good and marketable title to all of its property, real and
personal, and other assets included in the June, 1997 Financial Statements
(except properties and assets sold or otherwise disposed of subsequent to the
Statement Date in the ordinary course of business or as contemplated in this
Agreement), free and clear of all security interests, mortgages, liens, pledges,
charges, claims, or encumbrances of any kind or character, except (i) statutory
liens for property taxes not yet delinquent or payable subsequent to the date of
this Agreement and statutory or common law liens securing the payment or
performance of any obligation of the Company, the payment or performance of
which is not delinquent, or that is payable without interest or penalty
subsequent to the date on which this representation is given, or the validity of
which is being contested in good faith by the Company, (ii) the rights of
customers of the Company with respect to inventory under orders or contracts
entered into by the Company in the ordinary course of business; (iii) claims,
easements, liens, and other encumbrances of record pursuant to filings under
real property recording statutes; and (iv) as described in the Unaudited
Statements or the notes thereto.
2.9 LITIGATION. Except as set forth in SCHEDULE 2.9, there are no
material actions, suits, proceedings, orders, investigations, or claims pending
or, to the best of Seller's and the Company's knowledge, overtly threatened
against the Company or any property of either, at law or in equity, or before or
by any governmental department, commission, board, bureau, agency, or
instrumentality; the Company is not subject to any arbitration proceedings under
collective bargaining agreements or otherwise or, to the best of Seller's and
the Company's knowledge, any governmental investigations or inquiries; and, to
the best knowledge of Seller's and the directors and responsible officers of the
Company, there is no basis for any of the foregoing.
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<PAGE> 5
2.10 TAX MATTERS. Except as set forth on SCHEDULE 2.10, (i) the
Company has prepared in a substantially correct manner and has filed all
federal, provincial, local, and foreign tax returns and reports heretofore
required to be filed by them and have paid all taxes shown as due thereon; and
(ii) no taxing authority has asserted any deficiency in the payment of any tax
or informed the Company that it intends to assert any such deficiency or to make
any audit or other investigation of the Company for the purpose of determining
whether such a deficiency should be asserted against the Company.
2.11 COMPLIANCE WITH LAWS. To the best of Seller's knowledge, the
Company is, in the conduct of its business, in compliance with all laws,
statutes, ordinances, regulations, orders, judgments, or decrees applicable to
them, the enforcement of which, if the Company were not in compliance therewith,
would have a materially adverse effect on the business of the Company, taken as
a whole. Neither Seller nor the Company has received any notice of any asserted
present or past failure by the Company to comply with such laws, statutes,
ordinances, regulations, orders, judgments, or decrees.
2.12 NO BROKERS. There are no claims for brokerage commissions,
finders' fees, or similar compensation in connection with the purchase based on
any arrangement or agreement binding upon any of the parties hereto.
2.13 INSURANCE. SCHEDULE 2.13 contains a list of each insurance
policy maintained by the Company with respect to its properties, assets, and
businesses, and each such policy is in full force and effect. The Company is not
in material default with respect to its obligations under any such policy
maintained by it. Neither Seller nor the Company has been notified of the
cancellation of any of the insurance policies listed on SCHEDULE 2.13 or of any
material increase in the premiums to be charged for such insurance policies.
2.14 EMPLOYEES AND LABOR RELATIONS MATTERS. Except as set forth in
SCHEDULE 2.14 or as provided in this Agreement:
2.14.1 Neither Seller nor the Company is aware that any
executive or key employee of the Company or any group of employees of the
Company has any plans to terminate employment with the Company,
2.14.2 To the best of Seller's knowledge, the Company has
complied in all material respects with all labor and employment laws, including
provisions thereof relating to wages, hours, equal opportunity, collective
bargaining, nondiscrimination, and the payment of employment and employee
related taxes and other taxes;
2.14.3 There is no unfair labor practice charge, complaint,
or other action against the Company pending or, to Seller's and the Company's
best knowledge, threatened, and the Company is not subject to any order to
bargain by the government;
2.14.4 To Seller's and the Company's best knowledge, there
is no movement among employees to organize, or gain union representation for,
Company's employees;
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<PAGE> 6
2.14.5 No grievance that might have a material adverse
effect on the Company and no arbitration proceeding arising out of or under any
collective bargaining agreement is pending and, to the best knowledge of Seller
and the directors and responsible officers of the Company, no basis exists for
any such grievance or arbitration proceeding; and
2.14.6 To the best knowledge of Seller and the directors and
responsible officers of the Company, no employee of the Company is subject to
any noncompetition, nondisclosure, confidentiality, employment, consulting, or
similar agreements with persons other than the Company relating to the present
business activities of the Company except as disclosed in item 8 of Exhibit 2.18
hereto.
2.15 DISCLOSURE. To the best knowledge of Seller, neither this
Agreement nor any of the schedules, attachments, written statements, documents,
certificates, or other items prepared or supplied to Buyer by or on behalf of
the Company or Seller with respect to this purchase contain any untrue statement
of a material fact or omit a material fact necessary to make each statement
contained herein or therein not misleading. Neither Seller nor any responsible
officer or director has intentionally concealed any fact known by such person to
have a material adverse effect upon the Company's existing or expected financial
condition, operating results, assets, customer relations, employee relations, or
business prospects taken as a whole.
2.16 POWER OF ATTORNEY. Except as set forth in SCHEDULE 2.16, no
material power of attorney or similar authorization given by the Company is
presently in effect.
2.17 ACCOUNTS RECEIVABLE. To the best of Seller's and Company's
knowledge, all accounts receivable of the Company reflected in the June, 1997
Financial Statements represent bona fide sales actually made, and collectible,
in the ordinary course of business.
2.18 AGREEMENTS AND COMMITMENTS. SCHEDULE 2.18 contains a complete
and accurate list of each agreement, contract, instrument, and commitment
(including license agreements) to which the Company is a party that provides for
payments in excess of $10,000 per year or whose term is in excess of one year
and is not cancelable upon thirty (30) or fewer days' notice without any
liability, penalty, or premium, other than a nominal cancellation fee or charge
("Third Party Agreements"). Except as otherwise set forth in SCHEDULE 2.18,
2.18.1 The Company has no collective bargaining or union
contracts agreement in effect or being negotiated;
2.18.2 There is no labor strike, dispute, request for
representation, slowdown, or stoppage pending or, to Seller's and the Company's
best knowledge, threatened against the Company;
2.18.3 The Company is not in material default under any
Third Party Agreements, nor, to Seller's and the Company's best knowledge, does
there exist any event that,
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with notice or the passage of time or both, would constitute a material default
or event of default by the Company under any Third Party Agreements;
2.18.4 There is no pension or benefit fund which is less
than fully funded as required by government regulation and all applicable plan
provisions; and,
2.18.5 No third party consent is required in connection with
the sale of the Shares by Seller to Buyer.
2.19 PERSONAL PROPERTY. Without material exception, SCHEDULE 2.19
contains lists of all tangible personal property and assets owned or held by the
Company and used or useful in the conduct of the business of the Company. Except
as set forth in SCHEDULE 2.19, the Company owns and has good title to such
properties and none of such properties is subject to any security interest,
mortgage, pledge, conditional sales agreement or other lien or encumbrance
(except for liens for current taxes, assessments, charges, or other governmental
levies not yet due and payable). The Company has delivered to Buyer copies of
all leases and other agreements relating to property described in SCHEDULE 2.19
(including any and all amendments and other modifications to such leases and
other agreements) all of which are valid and binding, and the Company is not in
material default under any such leases or agreements. Except as set forth in
SCHEDULE 2.19 and to the best of Seller's knowledge, all material properties
listed therein are in good operating condition and repair (ordinary wear and
tear excepted), are performing satisfactorily, and are available for immediate
use in the conduct of the Business and operations of the Company. To the best of
Seller's knowledge, all such tangible personal property is in compliance in all
material respects with all applicable statutes, ordinances, rules, and
regulations. The properties listed in SCHEDULE 2.19 include substantially all
such properties necessary to conduct the business and operations of the Company
as now conducted.
2.20 REAL PROPERTY. SCHEDULE 2.20 contains a list of all real
property currently owned or leased by the Company and used or useful in the
conduct of the business operations of the Company. Except as set forth in
SCHEDULE 2.20, the Company has good and marketable fee simple title, insurable
at standard rates, to all of the real property listed as owned in SCHEDULE 2.20
free and clear of all liens, mortgages, pledges, covenants, easements,
restrictions, leases, charges, and other claims and encumbrances of any nature
whatsoever, and without reservation or exclusion of any mineral, timber, or
other rights or interests, except liens for real estate taxes, assessments,
charges, or other governmental levies not yet due and payable and except for
easements, rights of way, and restrictions of record. Seller has delivered to
Buyer copies of all leases listed in SCHEDULE 2.20 (including any and all
amendments and other modifications of such leases), which leases are valid and
binding. To the best of Seller's knowledge, the Company is not in material
default under any such leases. To the best of Seller's knowledge, all property
listed in SCHEDULE 2.20 (including improvements thereon) is in satisfactory
condition and repair consistent with its present use and is available for
immediate use in the conduct of the business of the company. Except as set forth
in SCHEDULE 2.20 and to the best of Seller's knowledge, none of the property
listed in SCHEDULE 2.20 or subject to leases listed in SCHEDULE 2.20 violates in
any material respect any applicable building, zoning or environmental code or
regulation of any governmental authority having jurisdiction. The
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property and leases described in SCHEDULE 2.20 include all such property or
property interests necessary to conduct the business and operations of the
Company as they are presently conducted.
2.21 PERSONNEL. SCHEDULE 2.21 sets forth a true and complete list
of:
2.21.1. The names, title, and current salaries of all
officers of the Company;
2.21.2 The names of all directors of the Company;
2.213 The wage rates (or ranges, if applicable) for each
class of exempt and nonexempt, salaried and hourly employees of the Company;
2.21.4 All scheduled or contemplated increases in
compensation or bonuses; and
2.21.5 All scheduled or contemplated employee promotions,
demotions, hirings, firings or disciplining.
2.22 PATENTS, TRADEMARKS, TRADE NAMES, ETC. SCHEDULE 2.22 contains
an accurate and complete list of all patents, trademarks, tradenames, service
marks, and copyrights, and all applications therefor, presently owned or held
subject to license by the Company and, to the Company's best knowledge, the use
thereof by the Company does not materially infringe on any, patents, trademarks,
or copyrights or any other rights of any person. To Seller's and the Company's
best knowledge, the Company has not operated and is not operating its business
in a manner that infringes the proprietary rights of any other person in any
patents, trademarks, trade names, service marks, copyrights, or confidential
information. Except as set forth in SCHEDULE 2.22, the Company has not received
any written notice of any infringement or unlawful use of such property.
2.23 BENEFIT PLANS AND RELATED MATTERS. SCHEDULE 2.23 sets forth a
description of all "Employee Welfare Benefit Plans" and "Employee Pension
Benefit Plans" existing on the date hereof that are or have been maintained or
contributed to by the Company. Except as listed on SCHEDULE 2.23, the Company
does not maintain any retirement or deferred compensation plan, savings,
incentive, stock option or stock purchase plan, unemployment compensation plan,
vacation pay, severance pay, bonus or benefit arrangement, insurance or
hospitalization program or any other fringe benefit arrangement for any
employee, consultant or agent of the Company, whether pursuant to contract,
arrangement, custom or informal understanding, for which the Company may have
any ongoing material liability after Closing. The Company does not maintain nor
has it ever contributed to any Multiemployer Plan. There have been no unlawful
transactions or actions with respect to any Employee Pension Benefit Plan or
Employee Welfare Benefit Plan maintained by the Company as to which the Company
has been party. As to any employee pension benefit plan listed on SCHEDULE 2.23,
there have been no events required to be reported to the government.
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2.24 ENVIRONMENTAL MATTERS. To the best of Company's and Seller's
knowledge, there exist no environmental conditions upon any real property
described in Schedule 2.20 which violate any local, state or federal government,
environmental or health code, ordinance, statute, order, notice or law; nor is
there any environmental condition which requires that notice be given to any
government entity pursuant to any such local, state or code, ordinance, statute,
order, notice or law.
2.25 REPRESENTATIONS TRUE, ACCURATE AND COMPLETE. All
representations and warranties made herein by Company and Seller are true,
accurate and complete in all material respects. Each of Company and Seller
agrees to notify Purchaser immediately in writing in the event it/he learns any
information required to make all representations and warranties of Company and
Seller herein true, accurate and complete in all material respects at all times
subsequent hereto.
SECTION 3.0. REPRESENTATIONS AND WARRANTIES OF BUYER. As a material
inducement to Seller to enter into this Agreement and to sell the Shares, Buyer
hereby represents and warrants to Seller as follows:
3.1 ORGANIZATION; POWER. Buyer is a corporation duly incorporated
and validly existing under the laws of Delaware, and has all requisite corporate
power and authority to enter into this Agreement and perform its obligations
hereunder.
3.2 AUTHORIZATION; CONSENTS. The execution, delivery, and
performance by Buyer of this Agreement and all other agreements contemplated
hereby to which Buyer is a party have been duly and validly authorized by all
necessary corporate action of Buyer, and this Agreement and each such other
agreement, when executed and delivered by the parties thereto, will constitute
the legal, valid, and binding obligation of Buyer enforceable against it in
accordance with its terms, except as enforceability may be limited by applicable
bankruptcy, insolvency, and similar statutes affecting creditors' rights
generally and judicial limits on equitable remedies. Buyer is required to obtain
the written consent of its secured institutional lenders in connection with the
acquisition of the Shares.
3.3 NO CONFLICT WITH OTHER INSTRUMENTS OR AGREEMENTS. The
execution, delivery, and performance by Buyer of this Agreement and all other
agreements contemplated hereby to which Buyer is a party will not result in a
breach or violation of, or constitute a default under, its Articles of
Incorporation or Bylaws or any material agreement to which Buyer is a party or
by which Buyer is bound.
3.4 GOVERNMENTAL AUTHORITIES. Except as set forth in SCHEDULE 3.4,
(i) Buyer is not required to submit any notice, report, or other filing with any
governmental or regulatory authority in connection with the execution and
delivery by buyer of this Agreement and the consummation of the purchase and
(ii) no consent, approval, or authorization of any governmental or regulatory
authority is required to be obtained by Buyer or any affiliate in connection
with Buyer's execution, delivery, and performance of this Agreement and the
consummation of this purchase.
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3.5 LITIGATION. There are no actions, suits, proceedings, or
governmental investigations or inquiries pending or, to the knowledge of Buyer,
threatened against Buyer or its properties, assets, operations, or businesses
that might delay, prevent, or hinder the consummation of this purchase.
3.6 INVESTMENT REPRESENTATIONS
3.6.1 Buyer is acquiring the Shares for its own account for
purposes of investment and without expectation, desire, or need for resale and
not with the view toward distribution, resale, subdivision, or fractionalization
of the Shares.
3.6.2 During the course of the negotiation of this
Agreement, Buyer has reviewed all information provided to it by the Company and
has had the opportunity to ask questions of and receive answers from
representatives of the Company concerning the Company, the securities offered
and sold hereby, and this purchase, and to obtain certain additional information
requested by Buyer.
3.63 Buyer understands that no public market now exists
for the Shares and that it is uncertain that a public market will ever exist for
the Shares.
3.7 BROKERAGE. There are no claims for brokerage commissions,
finders' fees, or similar compensation in connection with this purchase based on
any arrangement or agreement entered into by Buyer and binding upon any of the
parties hereto.
SECTION 4.0. CONDUCT OF THE COMPANY'S BUSINESS PENDING THE CLOSING.
From the date hereof until the Closing, and except as otherwise consented to or
approved by Buyer, Seller and the Company covenant and agree with Buyer as
follows:
4.1 REGULAR COURSE OF BUSINESS. The Company will operate its
business in accordance with the reasonable judgment of its management diligently
and in good faith, consistent with past management practices, and the Company
will continue to use its reasonable efforts to keep available the services of
present officers and employees (other than planned retirements) and to preserve
its present relationships with persons having business dealings with it. The
Company will not conduct any transactions outside the ordinary course of
business without the prior written consent of Purchaser.
4.2 DISTRIBUTIONS. The Company will not declare, pay, or set aside
for payment any dividend or other distribution in respect of its capital stock.
Nor will the Company repurchase any of its capital stock.
4.3 CAPITAL CHANGES. The Company will not issue any shares of its
stock, or issue or sell any securities convertible into, or exchangeable for, or
options, warrants to purchase, or rights to subscribe to, any shares of its
stock or subdivide or in any way reclassify any shares of its capital stock, or
repurchase reacquire, cancel, or redeem any such shares.
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4.4 ASSETS. The assets, property, and rights now owned by the
Company will be used, preserved, and maintained, as far as practicable, in the
ordinary course of business, to the same extent and in the same condition as
said assets, property, and rights are on the date of this Agreement, and no
unusual or novel methods of manufacture, purchase, sale, management, or
operation of said properties or business or accumulation or valuation of
inventory will be made or instituted. Without the prior consent of Buyer, the
Company will not encumber any of its assets or make any commitments relating to
such assets, property, or business, except in the ordinary course of its
business.
4.5 INSURANCE. The Company will keep or cause to be kept in effect
and undiminished the insurance now in effect on its various properties and
assets, and will purchase such additional insurance, at Buyer's cost, as Buyer
may request.
4.6 EMPLOYEES. The Company will not grant to any employee any
promotion, any increase in compensation, or any bonus or other award other than
promotions, increases, or awards that are regularly scheduled in the ordinary
course of business or contemplated on the date of this Agreement or that are, in
the reasonable judgment of management of the Company, in the Company's best
interest.
4.7 NO VIOLATION. The Company will comply in all material respects
with all statutes, laws, ordinances, rules, and regulations applicable to it in
the ordinary course of business.
4.8 PUBLIC ANNOUNCEMENTS. No press release or other announcement
to the employees, customers, or suppliers of the Company related to this
Agreement or this purchase will be issued without the joint approval of the
parties, unless required by law, in which case Buyer and Seller will consult
with each other regarding the announcement.
SECTION 5.0. COVENANTS OF THE COMPANY AND SELLER. Company and Seller
covenant and agree with Buyer as follows:
5.1 SATISFACTION OF CONDITIONS. The Company will use reasonable
efforts to obtain as promptly as practicable the satisfaction of the conditions
to Closing set forth in Section 7 and any necessary consents or waivers under or
amendments to agreements by which the Company is bound.
5.2 SUPPLEMENTS TO SCHEDULES. From time to time prior to the
Closing, Seller and the Company will promptly supplement or amend the schedules
with respect to any matter hereafter arising that, if existing or occurring at
the date of this Agreement, would have been required to be set forth or
described in any schedule and will promptly notify Buyer of any breach by either
of them that either of them discovers of any representation, warranty, or
covenant contained in this Agreement. No supplement or amendment of any schedule
made pursuant to this section will be deemed to cure any breach of any
representation of or warranty made in this Agreement unless Buyer specifically
agrees thereto in writing; provided, however, that if this purchase is closed,
Buyer will be deemed to have waived its rights with respect to any breach of a
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representation, warranty, or covenant or an supplement to any schedule of which
it shall have been notified pursuant to this Section 5.2.
5.3 NO SOLICITATION. Until the Closing or termination pursuant to
Section 10 of this Agreement, neither Seller nor the Company, nor any of their
respective directors, officers, employees, or agents shall, directly or
indirectly, encourage, solicit, initiate, or enter into any discussions or
negotiations concerning any disposition of any of the capital stock or all or
substantially all of the assets of the Company (other than pursuant to this
Agreement), or any proposal therefor, or furnish or cause to be furnished any
information concerning the Company to any party in connection with any
transaction involving the acquisition of the capital stock or assets of the
Company by any person other than Buyer. Seller or the Company will promptly
inform Buyer of any inquiry (including the terms thereof and the person making
such inquiry) received by any responsible officer or director of the Company or
Seller after the date hereof and believed by such person to be a bona fide,
serious inquiry relating to any such proposal.
5.4 ACTION AFTER THE CLOSING. Upon the reasonable request of any
party hereto after the Closing, any other party will take all action and will
execute all documents and instruments necessary or desirable to consummate and
give effect to this purchase. These include, by way of illustration and not by
way of limitation, the following:
5.4.1 Various conditions relating to filing, payment, and
collecting of refunds relating to taxes;
5.4.2 Provisions relating to delivery of Corporate books
and records; and
5.43 Provisions relating to treatment of confidential
proprietary information obtained in the acquisition process.
5.5 INDEMNIFICATION. Seller shall satisfy, indemnify, hold
harmless and defend Company and Buyer from and against any and all liabilities,
claims, costs, actions or expenses, including reasonable attorneys' fees,
accrued, in connection with or arising out of:
5.5.1 any condition existing, or liability, action or event
occurring, prior to the Closing Date to the extent that such liability,
condition, action or event has not been disclosed in this Agreement or in any of
the exhibits hereto;
5.5.2 any breach by Seller of any covenant to be performed
by Seller pursuant to this Agreement;
5.5.3 any misrepresentation made by Seller or Company in
this Agreement;
5.5.4 any violation of any environmental and/or tax code,
ordinance, regulation or law, and/or of any provision of state or federal law
dealing with employment benefits or unlawful discrimination, existing, accruing,
occurring or arising prior to the Closing Date,
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<PAGE> 13
including without limitation, costs, fines, penalties, interest assessments and
expenses relating to remediation and bringing company into full compliance with
such governmental requirements;
5.5.5 the termination of employment of any employees by
Company with cause within three (3) months after the Closing, including without
limitation, the incurring of costs and expenses, and the providing of previously
unfunded or unaccrued benefits, relating to employment severance and/or
redundancy; and
5.5.6 The liabilities identified in sections 5.5.1 through
5.5.5, above, shall be the "Indemnified Liabilities."
5.6 ACTIONS OF COMPANY AND SELLER. Neither Company nor Seller
shall take any actions subsequent to the date hereof, the effect of which would
be to make untrue, inaccurate or incomplete any of the warranties or
representations of Company or Seller herein made.
SECTION 6.0. COVENANTS OF BUYER.
Buyer will use its best efforts to cause the conditions set forth in
Section 8 to be satisfied.
SECTION 7.0. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF BUYER. Each and
every obligation of Buyer under this Agreement is subject to the satisfaction,
at or before the Closing, of each of the following conditions:
7.1 REPRESENTATIONS AND WARRANTIES; PERFORMANCE. Each of the
representations and warranties made by the Company herein will be true and
correct in all material respects as of the Closing with the same effect as
though made at that time except for changes contemplated, permitted, or required
by this Agreement; Seller and tile Company will have performed and complied with
all agreements, covenants, and conditions required by this Agreement to be
performed and complied with by them prior to the Closing; and Buyer will have
received, at the Closing, a certificate of the Company and Seller, signed by the
President and the Chief Financial Officer of the Company and Seller, stating
that each of the representations and warranties made by the Company herein is
true and correct in all material respects as of the Closing except for changes
contemplated, permitted, or required by this Agreement and that Seller and the
Company have performed and complied with all agreements, covenants, and
conditions required by this Agreement to be performed and complied with by them
prior to the Closing.
7.2 LITIGATION. No material action, suit, or proceeding before any
court, governmental or regulatory authority will have been commenced and be
continuing, and no investigation by any governmental or regulatory authority
will have been commenced and be continuing, and no action, investigation, suit,
or proceeding will be threatened at the time of Closing, against Seller, the
Company, or Buyer or any of their affiliates, associates, officers, or
directors, seeking to restrain, prevent, or change this purchase, questioning
the validity or legality of this purchase, or seeking damages in connection with
this purchase.
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<PAGE> 14
7.3 LEGAL OPINION. Buyer will have received an opinion of Miller,
Nash, Wiener, Hager & Carlsen of Portland, Oregon, in form and content
reasonably acceptable to Buyer and its legal counsel.
7.4 MATERIAL CHANGE. From the date of this Agreement to the
Closing, the Company shall not have suffered any material adverse change
(whether or not such change is referred to or described in any supplement to any
exhibit or schedule to this Agreement) in its business prospects, financial
condition, working capital, assets, liabilities (absolute, accrued, contingent,
or otherwise), or operations.
7.5 CORPORATE ACTION. Seller will have furnished to Buyer:
7.5.1 The corporate charter and all amendments thereto and
restatements thereof of the Company certified by the official having custody
over corporate records in the jurisdiction of incorporation of the corporation
in question;
7.5.2 The current bylaws and minutes of all meetings and
consents of shareholders and directors of the Company;
7.5.3 Each certificate of qualification to do business as a
foreign corporation of the Company;
7.5.4 All stock transaction records of the Company, and
7.5.5 A certificate of the Secretary or Assistant Secretary
of the Company as to the accuracy, currency, and completeness of each of the
above documents, the incumbency and signatures of officers of the Company, the
absence of any amendment to the charter documents of the Company, and the
absence of any proceeding for dissolution or liquidation of the Company.
SECTION 8.0. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE COMPANY AND
SELLER. Each and every obligation of Seller and the Company under this Agreement
is subject to the satisfaction, at or before the Closing, of each of the
following conditions:
8.1 REPRESENTATIONS AND WARRANTIES; PERFORMANCE. Each of the
representations and warranties made by Buyer herein will be true and correct in
all material respects as of the Closing with the same effect as though made at
that time except for changes contemplated, permitted, or required by this
Agreement; Buyer will have performed and complied with all agreements,
covenants, and conditions required by this Agreement to be performed and
complied with by it prior to the Closing; and Seller will have received, at the
Closing, a certificate of Buyer, signed by the President and the Chief Financial
Officer of Buyer, stating that each of the representations and warranties made
by Buyer herein is true and correct in all material respects as of the Closing
except for changes contemplated, permitted, or required by this Agreement and
that Buyer has performed and complied with all agreements, covenants, and
conditions required by this Agreement to be performed and complied with by it
prior to the Closing.
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<PAGE> 15
8.2 NO PROCEEDING OR LITIGATION. No action, suit, or proceeding
before any court (other than suits seeking monetary damages only and in the
aggregate sum of less than $10,000) and any governmental or regulatory authority
will have been commenced and be continuing, and no investigation by any
governmental or regulatory authority will have been commenced and be continuing,
and no action, investigation, suit, or proceeding will be threatened at the time
of Closing, against Seller, the Company, or Buyer or any of their affiliates,
associates, officers, or directors, seeking to restrain, prevent, or change this
purchase, questioning the validity or legality of this purchase, or seeking
damages in connection with this purchase.
8.3 CORPORATE ACTION. Buyer will have furnished to Seller a copy,
certified by the Secretary of an Assistant Secretary of Buyer, of the
resolutions of Buyer authorizing the execution, delivery, and performance of
this Agreement.
8.4 LEGAL OPINION. Seller will have received an opinion of David
P. Witman, Wellesley Law Associates of Wellesley, Massachusetts, in form and
content reasonably acceptable to Seller and his legal counsel.
SECTION 9.0. CLOSING.
9.1 TIME, PLACE, AND MANNER OF CLOSING. Unless this Agreement has
been terminated and this purchase has been abandoned pursuant to the provisions
of Section 10, the closing ("Closing") will be held at the offices of Company at
Portland, Oregon, or such other place as the parties may agree, as soon as
practicable after the satisfaction of the various conditions precedent to the
Closing set forth herein. At the Closing the parties to this Agreement will
exchange certificates, and other instruments and documents in order to determine
whether the terms and conditions of this Agreement have been satisfied. Upon the
determination of each party that its conditions to consummate this purchase have
been satisfied or waived, Seller shall deliver to Buyer the certificate(s)
evidencing the Shares, duly endorsed for transfer, and Buyer shall deliver to
Seller that portion of the Purchase Price required to be delivered at the
Closing. After the Closing, Seller will execute, deliver, and acknowledge all
such further instruments of transfer and conveyance and will perform all such
other acts as Buyer may reasonably request to effectively transfer the Shares.
9.2 CONSUMMATION OF CLOSING. All acts, deliveries, and
confirmations comprising the Closing regardless of chronological sequence shall
be deemed to occur contemporaneously and simultaneously upon the occurrence of
the last act, delivery, or confirmation of the Closing and none of such acts,
deliveries, or confirmations shall be effective unless and until the last of the
same shall have occurred. The time of the Closing has been scheduled to
correspond with the close of business at the principal office of the Company
and, regardless of when the last act, delivery, or confirmation of the Closing
shall take place, the transfer of the Shares shall be deemed to occur as of the
close of business at the principal office of the Company on the date of the
Closing.
SECTION 10.0. TERMINATION.
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<PAGE> 16
10.1 TERMINATION FOR CAUSE. If, pursuant to the provisions of
Section 7 or 8 of this Agreement, Seller or Buyer is not obligated at the
Closing to consummate this Agreement, then the party who is not so obligated may
terminate this Agreement.
10.2 TERMINATION WITHOUT CAUSE. Anything herein or elsewhere to the
contrary notwithstanding, this Agreement may be terminated and abandoned at any
time without further obligation or liability on the part of any party in favor
of any other by mutual consent of Buyer and Seller.
10.3 TERMINATION PROCEDURE. Any party having the right to terminate
this Agreement due to a failure of a condition precedent contained in Sections 7
or 8 hereto may terminate this Agreement by delivering to the other party
written notice of termination, and thereupon, this Agreement will be terminated
without obligation or liability of any party.
SECTION 11.0. MISCELLANEOUS PROVISIONS.
11.1 AMENDMENT AND MODIFICATION. Subject to applicable law, this
Agreement may be amended, modified, or supplemented only by a written agreement
signed by Buyer and Seller.
11.2 WAIVER OF COMPLIANCE; CONSENTS
11.2.1 Any failure of any party to comply with any
obligation, covenant, agreement, or condition herein may be waived, but only in
writing by the party entitled to the performance of such obligation, covenant,
or agreement or who has the benefit of such condition, but such waiver or
failure to insist upon strict compliance with such obligation, covenant,
agreement, or condition will not operate as a waiver of, or estoppel with
respect to, any subsequent or other failure.
11.2.2 Whenever this Agreement requires or permits consent
by or on behalf of any party hereto, such consent will be given in a manner
consistent with the requirements for a waiver of compliance as set forth above.
11.3 NOTICES. All notices, requests, demands, and other
communications required or permitted hereunder will be in writing and will be
deemed to have been duly given when delivered by hand or two days after being
mailed by certified or registered mail, return receipt requested, with postage
prepaid:
If to Buyer,
Joseph L. Sylvia, President
Simonds Holding Company, Inc.
P.O. Box 500
Fitchburg, MA 01420 USA
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<PAGE> 17
with a copy to:
David P. Witman, Esq.
Wellesley Law Associates
25 Walnut Street, 3d Floor
Wellesley, M 02181
or to such other person or address as Buyer furnishes to Seller pursuant to the
above.
If to Seller:
Mr. Fredric B. Andrianoff
c/o Armstrong Manufacturing Company
2135 N.W. 21st Avenue
P.O. Box 3008
Portland, OR 97208
with a copy to:
Gerald Froebe, Esq.
Miller, Nash, Wiener, Hager & Carlsen
111 S.W. Fifth Avenue
Portland, OR 97204
or to such other person or address as Seller furnishes to Buyer pursuant to the
above.
Notices to the Company shall be care of Seller prior to the Closing
Date and care of Buyer after the Closing Date.
11.4 TITLES AND CAPTIONS. All section titles or captions contained
in this Agreement are for convenience only and shall not be deemed part of the
context nor effect the interpretation of this Agreement.
11.5 ENTIRE AGREEMENT. This Agreement contains the entire
understanding between and among the parties and supersedes any prior
understandings and agreements among them respecting the subject matter of this
Agreement.
11.6 AGREEMENT BINDING. This Agreement shall be binding upon the
heirs, executors, administrators, successors and assigns of the parties hereto.
11.7 ATTORNEY FEES. In the event an arbitration, suit or action is
brought by any party under this Agreement to enforce any of its terms, or in any
appeal therefrom, it is agreed that the prevailing party shall be entitled to
reimbursement of all related reasonable costs and expenses, as well as
reasonable attorneys' fees to be fixed by the arbitrator, trial court, and/or
appellate court, as the case may be.
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<PAGE> 18
11.8 COMPUTATION OF TIME. In computing any period of time pursuant
to this Agreement, the day of the act, event or default from which the
designated period of time begins to run shall be included, unless it is a
Saturday, Sunday, or a legal holiday, in which event the period shall begin to
run on the next day which is not a Saturday, Sunday, or legal holiday, in which
event the period shall run until the end of the next day thereafter which is not
a Saturday, Sunday, or legal holiday.
11.9 PRONOUNS AND PLURAL. All pronouns and any variations thereof
shall be deemed to refer to the masculine, feminine, neuter, singular, or plural
as the identity of the person or persons may require.
11.10 GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the state of Oregon.
11.11 ARBITRATION. If at any time during the term of this Agreement
any dispute, difference, or disagreement shall arise upon or in respect of the
Agreement, and the meaning and construction hereof, every such dispute,
difference, and disagreement shall be referred to a single arbiter agreed upon
by the parties, or if no single arbiter can be agreed upon, three arbiters shall
be selected in accordance with the guidelines of the American Arbitration
Association, and such dispute, difference, or disagreement shall be settled by
binding arbitration. Judgment upon the award rendered by the arbiter(s) may be
entered in any court having jurisdiction thereof.
11.12 PRESUMPTION. This Agreement or any section thereof shall not
be construed against any party due to the fact that said Agreement or any
section thereof was drafted by said party.
11.13 FURTHER ACTION. The parties hereto shall execute and deliver
all documents, provide all information and take or forbear from all such action
as may be necessary or appropriate to achieve the purposes of the Agreement.
11.14 PARTIES IN INTEREST. Nothing herein shall be construed to be
to the benefit of any third party, nor is it intended that any provision shall
be for the benefit of any third party.
11.15 SAVINGS CLAUSE. If any provision of this Agreement, or the
application of such provision to any person or circumstance, shall be held
invalid, the remainder of this Agreement, or the application of such provision
to persons or circumstances other than those as to which it is held invalid,
shall not be affected thereby.
Dated: August 6, 1997
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<PAGE> 19
Simonds Holding Company, Inc. Armstrong Manufacturing Co.
a Delaware corporation as Buyer an Oregon corporation as Company
By: By:
--------------------------- ------------------------------
Joseph L. Sylvia, President John F. Wilson, President
- ----------------------------------------------
Frederic B. Andrianoff, Individually as Seller
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<PAGE> 20
EXHIBIT & SCHEDULE LISTS
EXHIBIT Description
- ------- -----------
2.5(A) Company 1995/1996 Financial Statements
2.5(B) Company June 1997 Financial Statements
1.3 Company Closing Financial Statements
SCHEDULE Description
- -------- -----------
2.3 Subsidiaries
2.4 Exceptions to Section 2.4's representation of no default on
other contracts
2.6 Omissions/Exceptions to Events in the Financial Statements
2.7 Material Adverse Changes Since Financial Statement Dates
2.8 Exceptions to Company's marketable title to its property
2.9 Exceptions to Section 2.9 representation of no lawsuits
against Company
2.10 Exceptions to Section 2.10 representation of all taxes paid
and reported
2.13 List of insurance policies
2.14 Exceptions to Section 2.14 representations regarding employees
and labor matters
2.16 Exceptions to Section 2.16 representations regarding powers of
attorney
2.18 List of Company's contracts
2.19 List of all personal property
2.20 List of all real property
2.21 Officer, director, & employee info
2.22 List of intellectual property
2.23 Description of all "Employee Welfare Benefit Plans" and
"Employee Pension Benefit Plans"
3.4 Exceptions to Section 3.4's representation regarding effects
of the Agreement on other contracts, laws, etc.
<PAGE> 1
EXHIBIT 2.3
SHARE PURCHASE AGREEMENT
This Agreement ("Agreement") is entered into this date by and among Time
Eclipse Limited, a company organized and existing under the laws of England
("Purchaser") (proposed to be renamed Simonds UK Holding Limited after
Completion), SI Holding Corporation, a corporation organized and existing under
the laws of Delaware, USA ("Guarantor") and all the holders of all the shares of
W. Notting Limited, a company organized and existing under the laws of England
("Company"), as set forth in SCHEDULE 2.2 hereto, made a part hereof
("Sellers").
WHEREAS, the Company presently has an authorized share capital comprising
Three Hundred Thousand (300,000) ordinary One Pound ((pound)1) shares (the
"Ordinary Shares");
WHEREAS, the Company presently has issued and outstanding Two Hundred Six
Thousand One Hundred Fifty-Two (206,152) Ordinary Shares, referred to herein as
the "Shares, all of which are duly issued to, fully paid and owned by Sellers,
and
WHEREAS, said Shares are the only issued and outstanding shares of the
Company; and
WHEREAS, Purchaser desires to purchase from Sellers and Sellers desire to
sell to Purchaser all of the Shares on the terms and subject to the conditions
set forth herein.
NOW, THEREFORE, IT IS AGREED AS FOLLOWS:
SECTION 1.0. SALE AND PURCHASE OF SHARES. Subject to the terms and
conditions set forth herein, at the Completion (as defined below) Sellers will
sell all of the Shares to Purchaser, with full title guarantee, and Purchaser
will purchase from Sellers all of the Shares, constituting one hundred percent
(100 %) of all of the issued and outstanding shares of the Company as of the
Completion.
1.1 PURCHASE PRICE. Purchaser will pay to Sellers the sum of Four
Million Two Hundred Fifty Thousand Pounds Sterling ((pound)4,250,000) for the
Shares ("Purchase Price"), as set forth in SECTION 1.3 hereafter.
1.2 ADJUSTMENTS TO PURCHASE PRICE. Within sixty (60) days after
Completion, the parties will reasonably agree on consolidated Completion
Financial Statements, representing fairly the financial condition of the Company
and the Subsidiaries as at the Completion Date. The Purchase Price will be
reduced, Pound Sterling-for-Pound Sterling, to the extent that (i) Net Current
Assets as represented in the Completion Financial Statements is less than
(pound)1,750,000 and/or (ii) the Completion Financial Statements show long-term
debt, and/or any short-term debt other than working capital debt in excess of
(pound)1,000,000. The Completion Financial Statements shall be prepared by Paul
Sewell, in cooperation with Sellers, under accounting principles and practices
identical to those employed in the March 31, 1998 Financial Statements (the
"Completion Financial Statements") to be attached hereto as EXHIBIT 1.2.
<PAGE> 2
1.3 PAYMENT OF PURCHASE PRICE. The Purchase Price will be paid at
Completion, allocable as follows:
(i) the sum of(pound)3,250,000, in the form of cash in partial
consideration of the Shares; and
(ii) the sum of (pound)1,000,000, in the form of a Term Promissory
Note, as set forth in EXHIBIT 1.3(iii) hereto, made a part hereof (the
"Note") as remaining consideration for the Shares. Amounts payable under
the Note will be subject to Purchaser's rights as set forth in SCHEDULE
2.24 hereto, to Purchaser's rights under SECTION 5.2 hereafter, and to
Purchaser's right of set off in the event of any adjustments to the
Purchase Price under SECTION 1.2, above.
SECTION 2.0. WARRANTIES OF SELLERS. As a material inducement to Purchaser
to enter into this Agreement and to purchase the Shares, Sellers warrant that,
as at Completion:
2.1 ORGANIZATION AND CORPORATE POWER. The Company is a company duly
incorporated and validly existing under the laws of England, and the Company is
qualified to do business in every jurisdiction in which its ownership of
property or current conduct of business requires it to qualify. The Company has
all requisite corporate power and authority and all material licenses, permits,
and authorizations necessary to own (or use under lease or license, as the case
may be) and operate its properties and to carry on its business as now
conducted. The Company's Memorandum and Articles of Association, reflecting all
amendments made thereto at any time prior to the date of this Agreement, as set
forth in EXHIBIT 2.1, made a part hereof, are correct, current and complete.
2.2 SHARES AND RELATED MATTERS. The authorized share capital, and
issued share capital, of the Company are as set forth in SCHEDULE 2.2 hereto.
Each Seller warrants in relation to his/her own shareholding that his/her Shares
are owned by him /her, that they will be sold by him /her with full title
guarantee, free and clear of all security interests, liens, encumbrances, or
other restrictions or claims, and that no other shares of the Company are issued
to him /her. The Company does not have outstanding and has not agreed, orally or
in writing, to issue any shares or securities convertible or exchangeable for
any shares, nor does it have outstanding nor has it agreed, orally or in
writing, to issue any options or rights to purchase or otherwise acquire its
shares. The Company is not subject to any obligation (contingent or otherwise)
to repurchase or otherwise acquire or retire any of its shares. The Company has
not violated any applicable securities laws or regulations in connection with
the offer or sale of its securities. All of the outstanding shares of the
Company are validly issued and fully paid. Neither Sellers nor the Company have
violated or will violate any applicable securities laws of England and Wales in
connection with the offer or sale of the Shares to Purchaser hereunder.
2.3 SUBSIDIARIES. Except as set forth in SCHEDULE 2.3, the Company
does not own or hold any rights to acquire any shares or any other security or
interest in any other company (the "Subsidiaries").
-2-
<PAGE> 3
2.3.1 ORGANIZATION AND CORPORATE POWER OF SUBSIDIARIES. Each
Subsidiary is a company duly incorporated and validly existing under the laws of
the jurisdiction under which is incorporated and is qualified to do business in
every jurisdiction in which its current ownership of property or current conduct
of business requires it to qualify. Each Subsidiary has all requisite corporate
power and authority and all material licenses, permits, and authorizations
necessary to own (or use under lease or license, as the case may be) and operate
its properties and to carry on its business as now conducted. The constitutional
documents of each Subsidiary, reflecting all amendments made thereto at any time
prior to the date of this Agreement, as set forth in EXHIBITS 2.3.1 (A-F), made
a part hereof, are correct and complete.
2.3.2 SHARES AND RELATED MATTERS OF SUBSIDIARIES. Each Subsidiary
does not have outstanding and has not agreed, orally or in writing, to issue any
shares or securities convertible or exchangeable for any of its shares, nor does
it have outstanding nor has it agreed, orally or in writing, to issue any
options or rights to purchase or otherwise acquire its shares. Each Subsidiary
is not subject to any obligation (contingent or otherwise) to repurchase or
otherwise acquire or retire any of its shares. Each Subsidiary has not violated
any applicable securities laws or regulations in connection with the offer or
sale of its securities. All of the outstanding shares of each Subsidiary are
validly issued and fully paid. The Company has full title to its shares of each
Subsidiary, free and clear of all security interests, liens, encumbrances, or
other restrictions or claims.
2.3.3 FINANCIAL STATEMENTS OF SUBSIDIARIES. Attached hereto as
EXHIBITS 2.3.3(A-F), made a part hereof, are the most recent financial
statements of each Subsidiary (the "Subsidiary Financial Statements"). The
Subsidiary Financial Statements fairly present the financial position of the
Subsidiaries as at the dates set forth therein, and have been prepared in
accordance with generally accepted accounting principles, consistently applied,
and in a manner consistent with the Financial Statements of the Company, except
for differences resulting from normally occurring adjustments required in their
respective jurisdictions, or as noted in the notes thereto, or in the Disclosure
Letter, this Share Purchase Agreement or in any SCHEDULE or EXHIBIT hereto.
Except as set forth in EXHIBIT 2.3.3(X), there are no adjustments that would be
required on independent audit review (under generally accepted principles of
accounting practiced in the jurisdiction applicable to each Subsidiary) of each
of the Subsidiary Financial Statements that would, individually or in the
aggregate, have a material negative effect upon the reported financial condition
of any Subsidiary.
2.3.4 WARRANTIES APPLICABLE TO SUBSIDIARIES. For purposes of
SECTIONS 2.4 through 2.24, hereinafter, the term "Company" shall include
"Subsidiaries." Provided however, that all references hereinafter to the
Financial Statements of the Company do not apply to any Subsidiary.
2.4 CONDUCT OF BUSINESS; LIABILITIES. Except as set forth in SCHEDULE
2.4, the Company is not in default under, and no condition exists that with
notice or lapse of time would constitute a material default of the Company under
(i) any mortgage, loan agreement, evidence of indebtedness, or other instrument
evidencing borrowed money to which the Company is a party or by which the
-3-
<PAGE> 4
Company or the properties of the Company are bound or (ii) any judgment, order,
or injunction of any court, arbitrator, or governmental agency that would
reasonably be expected to affect materially and adversely the business,
financial condition, or results of operations of the Company taken as a whole.
2.5 FINANCIAL STATEMENTS.
2.5.1 The consolidated 1996/1997 balance sheet, income statement
and cash flow statement of the Company as of September 30, 1997, as audited and
annotated (only as to the Company and the UK Subsidiary) by Williams Allan of
Windsor, Berkshire, England, in the form attached to this Agreement as EXHIBIT
2.5.1 (collectively, the "1996/1997 Financial Statements"), give a true and fair
(and to Seller's knowledge, materially accurate) view of the financial position
of the Company as at September 30, 1997, and have been prepared in accordance
with generally accepted accounting principles, consistently applied, and in a
manner consistent with the financial statements of the Company for the three (3)
prior years.
2.5.2 The consolidated, unaudited and unreviewed balance sheet
and income statement of the Company as at March 31, 1998, and for the month then
ended, in the form attached hereto as EXHIBIT 2.5.2 ("March 31, 1998 Financial
Statements"), give a fair (and to Seller's knowledge, materially accurate) view
of the financial position of the Company as at March 31, 1998 and the results of
operations for the one month then ended and have been prepared in accordance
with generally accepted accounting principles consistently applied and in a
manner substantially consistent with the 1996/1997 Financial Statements, except
for differences resulting from normally occurring adjustments, including, but
not limited to, income tax and tax accrual adjustments, or as noted in the March
31, 1998 Financial Statements or the notes thereto. Except as contemplated by or
permitted under this Agreement, there are no adjustments that would be required
on an independent audit review of the March 31, 1998 Financial Statements that
would, individually or in the aggregate, have a material negative effect upon
the Company's and the Subsidiaries' reported financial condition.
2.6 NO UNDISCLOSED LIABILITIES. Except for (i) trade liabilities and
trade obligations incurred in the ordinary course of business since March 31,
1998 ("Statement Date"), and (ii) liabilities or obligations described in
SCHEDULE 2.6, so far as Sellers are aware, neither the Company nor any of the
property of the Company is subject to any material liability or obligation that
was required, under generally accepted accounting practices applicable to the
1996-1997 Financial Statements, to be included or adequately reserved against in
the March 31, 1998 Financial Statements or described in the notes thereto and
was not so included, reserved against, or described. Each Seller warrants that
he/she has no knowledge of any basis for any material liability of Company,
contingent or otherwise, as at March 31, 1998, not reflected in the March 31,
1998 Financial Statements or described in the notes thereto.
2.7 ABSENCE OF CERTAIN CHANGES. Except as contemplated or permitted
by this Agreement or as described in SCHEDULE 2.7, since the Statement Date
there has not been:
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<PAGE> 5
2.7.1 Any material adverse change in the business, financial
condition, operations, or assets of the Company;
2.7.2 Any damage, destruction, or loss, whether covered by
insurance or not, materially adversely affecting the properties or business of
the Company;
2.7.3 Any sale or transfer by the Company of any tangible or
intangible asset other than in the ordinary course of business, any mortgage or
pledge or the creation of any security interest, lien, or encumbrance on any
such asset, or any lease of property, including equipment, other than tax liens
with respect to taxes not yet due and contract rights of customers in inventory;
2.7.4 Any declaration, setting aside, or payment of a
distribution in respect of, or the redemption or other repurchase by the Company
of, any shares of the Company;
2.7.5 Any material transaction not in the ordinary course of
business of the Company;
2.7.6 The lapse of any material trademark, assumed name, trade
name, service mark, copyright, or license or any application with respect to the
foregoing;
2.7.7 The grant of any increase in the compensation of officers
or employees (including any such increase pursuant to any bonus, pension,
profit-sharing, or other plan) other than customary increases on a periodic
basis, or required by agreement or understanding in the ordinary course of
business and in accordance with past practice;
2.7.8 The discharge or satisfaction of any material lien or
encumbrance or the payment of any material liability other than current
liabilities in the ordinary course of business;
2.7.9 The making of any material loan, advance, or guaranty to or
for the benefit of any person except the creation of accounts receivable in the
ordinary course of business; or
2.7.10 An agreement to do any of the foregoing.
2.8 TITLE AND RELATED MATTERS. Except as set forth in SCHEDULE 2.8,
the property, real and personal, and other assets included in the March 31, 1998
Financial Statements (except properties and assets sold or otherwise disposed of
subsequent to the Statement Date in the ordinary Course of business or as
contemplated in this Agreement) are the absolute property of the Company, free
and clear of all security interests, mortgages, liens, pledges, charges, claims,
or encumbrances of any kind or character, except (i) statutory liens for
property taxes not yet delinquent or payable subsequent to the date of this
Agreement and statutory or common law liens securing the payment or performance
of any obligation of the Company, the payment or
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performance of which is not delinquent, or that is payable without interest or
penalty subsequent to the date on which this representation is given, or the
validity of which is being contested in good faith by the Company; (ii) the
rights of customers of the Company with respect to inventory under orders or
contracts entered into by the Company in the ordinary course of business; (iii)
claims, easements, liens, and other encumbrances of record pursuant to filings
under real property recording statutes; and (iv) as described in the March 31,
1998 Financial Statements or the notes thereto.
2.9 LITIGATION. Except as set forth in SCHEDULE 2.9, there are no
material actions, suits, proceedings, orders, investigations, or claims pending
or overtly threatened against the Company or any property of the Company, at law
or in equity, or before or by any governmental department, commission, board,
bureau, agency, or instrumentality; the Company is not subject to any
arbitration proceedings or any governmental investigations or inquiries; and, to
the best knowledge of Sellers there is no basis for any of the foregoing.
2.10 TAX MATTERS. Except as set forth on SCHEDULE 2.10, (i) the
Company has prepared in a substantially correct manner and has filed all
national, local, and foreign tax returns and reports heretofore required to be
filed by them and have paid all taxes shown as due thereon; and (ii) no taxing
authority has asserted any deficiency in the payment of any tax or informed the
Company that it intends to assert any such deficiency or to make any audit or
other investigation of the Company for the purpose of determining whether such a
deficiency should be asserted against the Company.
2.11 COMPLIANCE WITH LAWS. The Company is, in the conduct of its
business, in compliance with all laws, statutes, ordinances, regulations,
orders, judgments, or decrees applicable to them, the enforcement of which, if
the Company were not in compliance therewith, would have a materially adverse
effect on the business of the Company, taken as a whole. For the purposes of
this warranty only, a "materially adverse effect" means aggregate liabilities,
and reasonable costs incurred post-Completion by the Company, any Subsidiary
and/or the Purchaser, resulting from any non-compliance by the Company and the
Subsidiaries in excess of Fifty Thousand Pounds Sterling ((pound). 50,000) in
the aggregate. No disclosures shall be permitted against this warranty, and this
warranty is not subject to the limitations set forth in SECTIONS 3.0 and 4.2 of
SCHEDULE 2.24 hereto.
2.12 NO BROKERS. There are no claims for brokerage commissions,
finders' fees, or similar compensation in connection with the purchase of the
Shares by Purchaser hereunder based on any arrangement or agreement binding upon
any of the Sellers.
2.13 INSURANCE. SCHEDULE 2.13 contains a list of each insurance policy
maintained by the Company with respect to its properties, assets, and
businesses, and each such policy is in full force and effect, so far as Sellers
are aware. The Company is not in material default with respect to its
obligations under any such policy maintained by it. Neither Sellers nor the
Company has been notified of the cancellation, or potential cancellation, of any
of the insurance policies listed on SCHEDULE 2.13 or of any material increase in
the premiums to be charged for such insurance policies.
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2.14 EMPLOYEES AND LABOR RELATIONS MATTERS. Except as set forth in
SCHEDULE 2.14:
2.14.1 Sellers are not aware that any executive or key employee
of the Company or any group of employees of the Company has any plans to
terminate employment with the Company;
2.14.2 The Company has complied in all material respects with all
labor and employment laws, including provisions thereof relating to wages,
redundancies, benefits, hours, equal opportunity, collective bargaining,
nondiscrimination, and the payment of employment and employee related taxes and
other taxes;
2.14.3 There is no unfair labor practice charge, complaint, or
other action against the Company pending or threatened, and the Company is not
subject to any order to bargain by the government;
2.14.4 Sellers are not aware of any movement among employees to
organize, or gain trade union representation for, Company's employees;
2.14.5 No grievance that might have a material adverse effect on
the Company and no arbitration proceeding arising out of any material employment
claim is currently pending and Sellers are not aware of any basis for any such
grievance or arbitration proceeding;
2.14.6 There is no labor strike, dispute, request for
representation, slowdown, or stoppage currently pending, and Sellers are aware
of none threatened against the Company; and
2.14.7 Sellers are not aware that any employee of the Company is
subject to any non competition, nondisclosure, confidentiality, employment,
consulting, or similar agreements with persons other than the Company relating
to the present business activities of the Company except as disclosed in EXHIBIT
2.18 hereto.
2.15 DISCLOSURE. Sellers are not aware of any facts indicating that
this Agreement, any of the schedules or exhibits hereto, or any of the documents
delivered by Sellers to Purchaser in the Sellers' Disclosure Letter, contain any
untrue statement of a material fact or omit a material fact necessary to make
each statement contained herein or therein not misleading.
2.16 POWERS OF ATTORNEY. Except as set forth in SCHEDULE 2.16, no
material power of attorney or similar authorization given by the Company, or any
Seller with respect to the Company or the Shares, is presently in effect.
2.17 ACCOUNTS RECEIVABLE. All accounts receivable of the Company
reflected in the March 31, 1998 Financial Statements represent bona fide sales
actually made and are
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collectible (unless reserved against in the March 31, 1998 Financial Statements,
or as set forth otherwise in SCHEDULE 2.17 hereto, or where they relate to sales
made to the Guarantor or its subsidiaries) in the ordinary course of business.
2.18 AGREEMENTS AND COMMITMENTS. SCHEDULE 2.18 contains a complete and
accurate list of each material agreement, contract, instrument, and commitment
(including license agreements) to which the Company is a party that provides for
payments in excess of (pound)10,000 per year or whose term is in excess of one
year and is not cancelable upon thirty (30) or fewer days' notice without any
liability, penalty, or premium, other than a nominal cancellation fee or charge
("Third Party Agreements").
2.18.1 The Company has no collective bargaining or trade union
contracts agreement in effect or being negotiated;
2.18.2 The Company is not in material default under any Third
Party Agreement, nor are the Sellers aware of any event that, with notice or the
passage of time or both, would constitute a material default or event of
material default by the Company under any Third Party Agreement;
2.18.3 In connection with the Company's pension scheme, Sellers
are aware of no material error or omission in any Norwich Union report included
in the Disclosure Letter, and Sellers have no reason to believe that any pension
plan of the Company or any Subsidiary is less than fully funded as required by
government regulation and all applicable plan provisions; and,
2.18.5 No third party or governmental consent is required in
connection with the sale of the Shares by Seller to Purchaser, nor, as respects
any Subsidiary, in connection with the change of control of Company as
contemplated in this Agreement.
2.19 PERSONAL PROPERTY. Without material exception, SCHEDULE 2.19
contains lists of all fixed assets owned or held by the Company and used in the
conduct of the business of the Company. Except as set forth in SCHEDULE 2.19,
the Company owns and has full title to such fixed assets, and none of such fixed
assets is subject to any security interest, mortgage, pledge, conditional sales
agreement, or other lien or encumbrance (except for liens for current taxes,
assessments, charges, or other governmental levies not yet due and payable). The
Company has delivered to Purchaser copies of all leases relating to leased fixed
assets described in SCHEDULE 2.19 (including any and all amendments and other
modifications to such leases) all of which are valid and binding, and the
Company is not in material default under any such leases. Except as set forth in
SCHEDULE 2.19, all fixed assets listed therein are generally in good operating
condition and repair (ordinary wear and tear excepted), are performing
satisfactorily at current production levels, and are available for immediate use
in the conduct of the business and operations of the Company. The fixed assets
listed in SCHEDULE 2.19 include all such fixed assets reasonably necessary to
conduct the business and operations of the Company as currently conducted.
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2.20 REAL PROPERTY. SCHEDULE 2.20 contains a list of all real property
currently owned or leased by the Company and used in the conduct of the business
operations of the Company. Except as set forth in SCHEDULE 2.20, the Company has
absolute title to all of the real property listed as owned in SCHEDULE 2.20 free
and clear of all liens, mortgages, pledges, covenants, easements, restrictions,
leases, charges, and other claims and encumbrances of any nature whatsoever, and
without reservation or exclusion of any mineral, timber, or other rights or
interests, except liens for real estate taxes, assessments, charges, or other
governmental levies not yet due and payable and except for easements, rights of
way, and restrictions of record. Sellers have delivered to Purchaser copies of
all leases listed in SCHEDULE 2.20 (including any and all amendments and other
modifications of such leases), which leases are valid and binding. The Company
is not in material default under any such leases. All property listed in
SCHEDULE 2.20 (including improvements thereon) is in satisfactory condition and
repair consistent with its present use and is available for immediate use in the
conduct of the business of the Company.
2.20.1 Except asset forth in SCHEDULE 2.20.1, none of the
freehold property listed in SCHEDULE 2.20, or the leasehold property subject to
leases listed in SCHEDULE 2.20, violates in any material respect any applicable
building, use or planning code or regulation of any governmental authority
having jurisdiction.
2.20.2 The property and leases described in SCHEDULE 2.20 include
all such property or property interests necessary to conduct the business and
operations of the Company as they are presently conducted.
2.20.3 The replies given by the Sellers' solicitors (Shoosmiths &
Harrison) to the Purchaser's solicitors' (Browne Jacobson) enquiries concerning
the Company's real property at Garman Road are true, complete and accurate in
all material respects.
2.21 PERSONNEL. SCHEDULE 2.21 sets forth a true and complete list of:
2.21.1 The names, title, and current salaries of all officers of
the Company;
2.21.2 The names of all directors of the Company;
2.21.3 The wage rates for each salaried and hourly employee of
the Company;
2.21.4 All scheduled increases in compensation or bonuses; and
2.21.5 All scheduled employee promotions, demotions, hirings,
firings or disciplining.
2.22 PATENTS. TRADEMARKS, TRADE NAMES, ETC. SCHEDULE 2.22 contains an
accurate and complete list of all registered patents, trademarks, trade names,
service marks, and copyrights, and all applications therefor, presently owned or
held subject to license by the
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Company, and the use thereof by the Company does not materially infringe on any
patents, trademarks, or copyrights or any other rights of any other person.
Except as set forth in SCHEDULE 2.22, the Company has not received any written
notice of any infringement or unlawful use of any patents, trademarks, or
copyrights or any other rights of any other person, and Sellers are aware of no
such infringement or unlawful use not set forth in SCHEDULE 2.22.
2.23 BENEFIT PLANS AND RELATED MATTERS. SCHEDULE 2.23 sets forth a
description of all employee benefit plans and employee pension plans existing on
the date hereof that are or have been maintained or contributed to by the
Company. Except as listed on SCHEDULE 2.23, the Company does not maintain any
retirement or deferred compensation plan, savings, incentive, share options or
share purchase plans, unemployment compensation plan, vacation pay, severance
pay, bonus or benefit arrangement, insurance or hospitalization program or any
other fringe benefit arrangement for any employee, consultant or agent of the
Company, whether pursuant to contract, arrangement, custom or informal
understanding, for which the Company may have any ongoing material liability
after Completion. There have been no unlawful transactions or actions with
respect to any benefit plan or pension plan maintained by the Company as to
which the Company has been party. As to any employee pension plan listed on
SCHEDULE 2.23, there have been no events required to be reported to the
government.
2.24 WARRANTIES TRUE, ACCURATE AND COMPLETE. All warranties made
herein by Sellers are true, accurate and complete in all respects. SCHEDULE 2.24
sets out certain limitations and other provisions with respect to Sellers'
liability under the Warranties and the Tax Covenant set out at Schedule 4.2 in
this Agreement. The warranties given by the Sellers in SECTIONS 2.1 through 2.24
are referred to herein as the "Warranties."
SECTION 3.0. WARRANTIES OF PURCHASER AND GUARANTOR. As a material
inducement to Sellers to enter into this Agreement and to sell the Shares,
Purchaser and Guarantor hereby warrant, jointly and severally, to Sellers as
follows:
3.1 ORGANIZATION; POWER. Purchaser is a company duly incorporated and
validly existing under the laws of England, and has all requisite corporate
power and authority to enter into this Agreement and perform its obligations
hereunder. Guarantor is a company duly incorporated and validly existing under
the laws of Delaware, USA, and has all requisite corporate power and authority
to enter into this Agreement and perform its obligations hereunder.
3.2 AUTHORIZATION; CONSENTS. The execution, delivery, and performance
by Purchaser and Guarantor of this Agreement and all other agreements
contemplated hereby to which Purchaser is a party have been duly and validly
authorized by all necessary corporate action of Purchaser and Guarantor, and
this Agreement and each such other agreement, when executed and delivered by the
parties thereto, will constitute the legal, valid, and binding obligation of
Purchaser and Guarantor enforceable against each of them in accordance with its
terms, except as enforceability may be limited by applicable bankruptcy,
insolvency, and similar statutes affecting creditors' rights generally and
judicial limits on equitable remedies. Purchaser and Guarantor have obtained the
written consent of their secured institutional lenders in
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connection with the acquisition of the Shares by Purchaser, which consents are a
condition to Completion.
3.3 NO CONFLICT WITH OTHER INSTRUMENTS OR AGREEMENTS. The execution,
delivery, and performance by Purchaser and Guarantor of this Agreement and all
other agreements contemplated hereby to which Purchaser is a party will not
result in a breach or violation of, or constitute a default under, the
Memorandum and Articles of Association, as to Purchaser, and the Articles of
Association, as to Guarantor, or any material agreement to which Purchaser or
Guarantor is a party or by which Purchaser or Guarantor is bound.
3.4 GOVERNMENTAL AUTHORITIES. Except as set forth in SCHEDULE 3.4,
(i) neither Purchaser nor Guarantor is required to submit any notice, report, or
other filing with any governmental or regulatory authority in connection with
the execution and delivery by Purchaser and Guarantor of this Agreement and the
consummation of the purchase and (ii) no consent, approval, or authorization of
any governmental or regulatory authority is required to be obtained by Purchaser
or Guarantor, or any affiliate of either of them, in connection with Purchaser's
and Guarantor's execution, delivery, and performance of this Agreement and the
consummation of this purchase by Purchaser.
3.5 LITIGATION. There are no actions, suits, proceedings, or
governmental investigations or inquiries pending or, to the knowledge of
Purchaser or Guarantor, threatened against Purchaser or Guarantor, their
properties, assets, operations, or businesses that might delay, prevent, or
hinder the consummation of this purchase by Purchaser.
3.6 INVESTMENT REPRESENTATIONS.
3.6.1 Purchaser is acquiring the Shares for its own account for
purposes of investment and without expectation, desire, or need for resale and
not with the view toward distribution, resale, subdivision, or fractionalization
of the Shares.
3.6.2 Purchaser understands that no public market now exists for
the Shares and that it is uncertain that a public market will ever exist for the
Shares.
3.7 BROKERAGE. There are no claims for brokerage commissions,
finders' fees, or similar compensation in connection with this purchase based on
any arrangement or agreement entered into by Purchaser and binding upon
Purchaser.
SECTION 4.0. INDEMNIFICATION.
4.1 ENVIRONMENTAL INDEMNIFICATION. Subject only to the applicable
provisions and limitations set forth in SCHEDULE 2.24 hereto, Sellers shall
severally satisfy, indemnify, hold harmless and defend Company and Purchaser
from and against any and all liabilities, claims, reasonable costs, actions or
reasonable expenses, including reasonable attorneys' fees, accrued, in
connection with or arising out of any breach(es) of any environmental code,
ordinance, regulation or law existing, accruing, occurring or arising prior to
the Completion
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Date, including without limitation, reasonable costs, fines, penalties, interest
assessments and reasonable expenses relating to remediation and bringing
Company, and/or any Subsidiary, into full compliance with such governmental
requirements.
4.2 TAX INDEMNIFICATION. Subject only to the applicable provisions
and limitations set forth in SCHEDULE 2.24 hereto, Sellers are providing to the
Purchaser the tax covenant attached hereto as SCHEDULE 4.2, made a part hereof.
4.3 The liabilities identified in this Section 4.1 and Section 4.2
are the "Indemnified Liabilities."
SECTION 5.0. WAIVER OF CERTAIN RIGHTS; CONFIDENTIALITY AND NON-COMPETITION.
5.1 Each Seller hereby waives any and all rights which she/he might
otherwise have under the Articles of Association of the Company, any corporate
resolution, any Shareholder Agreement, or otherwise, to pre-emptively purchase
any of the Shares as the result of the transactions contemplated by this
Agreement.
5.2 Each Seller hereby ratifies and confirms all issues and
allotments of shares and all transfers of shares which have taken place and
which have resulted ultimately in the issued share capital as set out in
SCHEDULE 2.2 and hereby waive any claim that he/she /it may have against any
other person or the Company in respect of any such issue, allotment or transfer
taking place or being registered in contravention of the Articles of
Association.
5.3 Sellers Michael Johnson, Patrick Drew, Julian Gaisford St
Lawrence and Thomas Nigel Miller (the "Restricted Sellers"), and no other
Seller, agree as follows:
5.3.1 For a period of three (3) years from the date hereof (the
"Restriction Period"), each Restricted Seller covenants and agrees, severally
and not jointly, that he will not own nor operate, directly or indirectly, any
business dealing in products competitive with the current products, nor any
services competitive with the current services, of the Company within Europe,
Canada or the United States of America (the "Territory"). Each Restricted Seller
covenants and agrees that during the Restriction Period, he will not function as
a principal, employee, agent, consultant or otherwise, directly or indirectly,
of, for or with any related business competitive with the business of the
Company (as currently conducted) within the Territory. A Restricted Seller may,
however, own five percent (5 %) or less of the shares of a publicly traded
entity which does engage in such business, and a Restricted Seller may function
as a consultant, or otherwise, for the Purchaser or the Company, if requested to
do so by the Purchaser or the Company, and if such Restricted Seller so agrees.
5.3.2 Purchaser shall have the right to set off against damages
suffered by Purchaser for any violation of this SECTION 5.2 by a Restricted
Seller any amounts owing such Restricted Seller under the Note, subject only to
SECTION 12.0 and SECTION 15.0 of SCHEDULE 2.24 hereto.
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5.4 Each Seller shall keep confidential, and shall not use or
disclose to any third party, directly or indirectly, any proprietary or
confidential information of the Company.
SECTION 6.0. COMPLETION.
6.1 TIME, PLACE. AND MANNER OF COMPLETION. The completion
("Completion") will be held at the offices of Shoosmiths & Harrison in
Nottingham, England, or such other place as the parties may agree,
simultaneously upon the execution and delivery of this Agreement.
6.2 DELIVERIES AT COMPLETION.
6.2.1 Sellers shall deliver to Purchaser
(i) duly executed transfers of the Shares in favor of the
Purchaser (or as it shall direct) together with the certificates
evidencing the Shares, or, in the case of any lost certificates, a
lost certificate indemnity satisfactory to Purchaser, as well as all
certificates of shares of each Subsidiary;
(ii) the common seal of the Company and each Subsidiary;
(iii) the certificate of incorporation and any certificates of
incorporation on change of name of the Company and the UK Subsidiary
and each original and current certificate of qualification of the
United States and Canadian Subsidiary to do business as a foreign
corporation in a foreign jurisdiction;
(iv) the statutory books of the Company and its United Kingdom
Subsidiary, complete and up-to-date, as well as copies of same as to
each other Subsidiary and a certificate of the Secretary of the
Company as to the name of custodian and location of same as to each
Subsidiary;
(v) a certificate of the Secretary of the Company as to the
absence of any amendment to the constitutional documents of the
Company and each Subsidiary;
(vi) the Disclosure Letter and the bundle of disclosure
documents;
(vii) a certificate of the Secretary of the Company of the board
minutes of the Company approving the registration of the Shares being
transferred to Purchaser under this Agreement, subject only to the
transfers of such Shares being stamped,
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(viii) written resignation of Williams Allan from their position
as auditors for the Company and the UK Subsidiary, acknowledging that
they have no claim whatsoever against the Company or the UK Subsidiary
and containing the statement required by Section 394 of the Companies
Act 1985; and
(ix) written resignations and waivers of all claims of the
Directors of the Company and each Subsidiary with regard to their
positions as directors.
6.2.2 Purchaser shall deliver to Shoosmiths & Harrison, on behalf
of Sellers,
(i) by way of telegraphic transfer, that portion of the Purchase
Price required to be delivered at the Completion;
(ii) the Note, and each individual certificate thereto relating
to each Seller;
(iii) a certificate of the Secretary of Purchaser of the
resolution of Purchaser authorizing the execution, delivery and
performance of this Agreement and the Note; and
(iv) a certificate of the Secretary of SI Holding Corporation of
the resolution of SI Holding Corporation authorizing the execution,
delivery and performance of this Agreement as Guarantor.
6.3 CONSUMMATION OF COMPLETION. All acts, deliveries, and
confirmations comprising the Completion regardless of chronological sequence
shall be deemed to occur contemporaneously and simultaneously upon the
occurrence of the last act, delivery, or confirmation of the Completion and none
of such acts, deliveries, or confirmations shall be effective unless and until
the last of the same shall have occurred. The time of the Completion is
scheduled to correspond with the close of business at the principal office of
the Company and, regardless of when the last act, delivery, or confirmation of
the Completion shall take place, the completion of the purchase of the Shares
shall be deemed to occur as of the close of business at the principal office of
the Company on the date of the Completion.
SECTION 7.0. MISCELLANEOUS PROVISIONS.
7.1 AMENDMENT AND MODIFICATION. Subject to applicable law, neither
this Agreement nor the Guaranty may be amended, modified, or supplemented only
by a written agreement signed by Purchaser and Sellers.
7.2 WAIVER OF COMPLIANCE: CONSENTS
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7.2.1 Any failure of any party to comply with any obligation,
covenant, agreement, or condition herein may be waived, but only in writing by
the party entitled to the performance of such obligation, covenant, or agreement
or who has the benefit of such condition, but such waiver or failure to insist
upon strict compliance with such obligation, covenant, agreement, or condition
will not operate as a waiver of, or estoppel with respect to, any subsequent or
other failure.
7.2.2 Whenever this Agreement requires or permits consent by or
on behalf of any party hereto, such consent will be given in a manner consistent
with the requirements for notices as set forth in Section 8.3 below.
7.3 NOTICES. All notices, requests, demands, and other communications
required or permitted hereunder will be in writing and will be deemed to have
been duly given (i) when delivered by hand, or (ii) two days after being mailed
by certified or registered mail with postage prepaid within a single country, or
(iii) twenty days after being mailed by certified or registered mail with
postage prepaid between different countries, or (iv) five days after being sent
via Federal Express or DHL.
If to Purchaser,
Joseph L. Sylvia, Managing Director
Time Eclipse, Limited
c/o Simonds Industries Inc.
P.O. Box 500
Fitchburg, MA 01420 USA
with a copy to:
David P. Witman
Wellesley Law Associates
25 Walnut Street, 3rd Floor
Wellesley, MA 02181 USA
and to:
Mr. David Tilly
Browne Jacobson, Solicitors
44 Castle Gate
Nottingham NGl 7BJ
ENGLAND
or to such other person or address as Purchaser hereafter furnishes to Sellers
pursuant to the provisions of this SECTION 7.3.
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If to Sellers, with regard to any Claim under the Warranties, the Tax Covenant
or the Indemnified Liabilities:
Mr. Michael Johnson
c/o The Needham Partnership
9 Needham Road
London, ENGLAND W11 2RP
with a copy to:
Mr. Nigel Thorne
Shoosmith & Harrison, Solicitors
Lockhouse, Castle Meadow Road
Nottingham, ENGLAND NG2 1AG
or to such other person or address as Sellers furnish hereafter to Purchaser
pursuant to the provisions of this SECTION 7.3.
If to Sellers, with regard to any other matter:
to their individual addresses set forth in SCHEDULE 2.2;
with a copy to:
Mr. Nigel Thorne
Shoosmiths & Harrison, Solicitors
Lockhouse, Castle Meadow Road
Nottingham, ENGLAND NG2 IAG
or to such other person or address as an individual Seller furnishes hereafter
to Purchaser and the Sellers' Committee pursuant to the provisions of this
SECTION 7.3.
7.4 TITLES; CAPTIONS: COUNTERPARTS. All section titles or
captions contained in this Agreement are for convenience only and shall not be
deemed part of the context nor effect the interpretation of this Agreement. This
Agreement may be executed in any number of counterparts and by the parties to it
on separate counterparts, each of which when so executed and delivered shall be
an original, but all the counterparts shall together constitute one and the same
instrument.
7.5 ENTIRE AGREEMENT. This Agreement contains the entire
understanding between and among the parties and supersedes any prior
understandings and agreements among them respecting the subject matter of this
Agreement.
7.6 TIME OF THE ESSENCE. Time shall be of the essence of this
Agreement, as regards both the dates and periods mentioned and any dates and
periods which may be
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substituted for them in accordance with this Agreement or by agreement in
writing among the parties (whether or not executed as a deed).
7.7 ATTORNEY FEES. In the event a suit or action is brought by
any party under this Agreement to enforce any of its terms, or in any appeal
therefrom, it is agreed that the prevailing party shall be entitled to
reimbursement of all related reasonable costs and expenses, as well as
reasonable attorneys' fees to be fixed by the court, provided that this will
always be subject to the limitation of Sellers' liability as set out in Clause
5.0 of SCHEDULE 2.24.
7.8 COMPUTATION OF TIME. In computing any period of time
pursuant to this Agreement, the day of the act, event or default from which the
designated period of time begins to run shall be included, unless it is a
Saturday, Sunday, or a legal holiday, in which event the period shall begin to
run on the next day which is not a Saturday, Sunday, or legal holiday, in which
event the period shall run until the end of the next day thereafter which is not
a Saturday, Sunday, or legal holiday.
7.9 PRONOUNS AND PLURALS. All pronouns and any variations
thereof shall be deemed to refer to the masculine, feminine, neuter, singular,
or plural as the identity of the person or persons may require.
7.10 GOVERNING LAW AND SUBMISSION TO JURISDICTION. This Agreement
and the documents to be entered into pursuant to it shall be governed by and
construed in accordance with English law, and all the parties irrevocably agree
that the Courts of England are to have non-exclusive jurisdiction to settle any
disputes which may arise out of or in connection with this Agreement and such
documents.
7.11 FURTHER ASSURANCE. After Completion, the Sellers shall, at
the Purchaser's cost, execute such documents and do such acts and things as the
Purchaser may reasonably require for the purpose of giving to the Purchaser the
full benefit of SECTION 1.0 of this Agreement
7.12 PARTIES IN INTEREST. Nothing herein shall be construed to be
to the benefit of any third party, nor is it intended that any provision shall
be for the benefit of any third party.
7.13 SAVINGS CLAUSE. If any provision of this Agreement, or the
application of such provision to any person or circumstance, shall be held
invalid, the remainder of this Agreement, or the application of such provision
to persons or circumstances other than those as to which it is held invalid,
shall not be affected thereby.
7.14 NO ASSIGNMENT. This Agreement shall be personal to the
parties to it, and no party may assign the benefit of any provisions of this
Agreement to any other person, save that (and save otherwise expressly provided
herein) the benefit of any of its provisions may be assigned to any company
which is a subsidiary of the party concerned or which is a holding company of
such party or a subsidiary of such holding company, but only for so long as such
company remains the holding company or subsidiary of the party concerned, or a
subsidiary of
-17-
<PAGE> 18
such holding company and remains the beneficial owner of such benefit so
assigned. In the event that any such subsidiary or holding company ceases to be
such, then all such assigned rights and benefits shall be assigned back promptly
to the assignor. Subject to the aforesaid, this Agreement shall be binding upon
and enure to the benefit of the personal representatives of, and successors in
title to, each of the parties hereto. Additionally, Purchaser may assign
collaterally to Heller Financial, as Agent for the institutional investors of
Purchaser and Guarantor, all Warranties and certifications made by Sellers
hereunder.
7.15 APPOINTMENT OF PROCESS AGENTS.
7.15.1 The Purchaser and the Guarantor hereby irrevocably
appoint Browne Jacobson of 44 Castle Gate, Nottingham NGI 7BJ as their agent for
the service of process in England, service upon whom shall be deemed completed
whether or not forwarded to or received by Purchaser or Guarantor. If such
process agents cease to have an address in England, the Purchaser and the
Guarantor irrevocably agree to appoint new process agents acceptable to the
Sellers and to deliver to the Sellers within fourteen (14) days a copy of a
written acceptance of appointment by the process agents.
7.15.2 Each Seller hereby irrevocably appoints Shoosmiths &
Harrison of Lockhouse, Castle Meadow Road, Nottingham NG2 IAG as his/her agent
for the service of process in England, service upon whom shall be deemed
completed whether or not forwarded to or received by any Seller. If such process
agents cease to have an address in England, each Seller irrevocably agrees to
appoint new process agents acceptable to the Purchaser and to deliver to the
Purchaser within fourteen (14) days a copy of a written acceptance of
appointment by the process agents.
7.15.3 Nothing contained in this Agreement shall affect the
right to serve process in any other manner permitted by law of the right to
bring proceedings in any other jurisdiction for the purposes of enforcement or
execution of any judgment or other settlement in any of the courts.
7.16 COSTS. Each party hereto shall bear, and be solely
responsible for, without contribution from any other party, his /her/its own
costs incurred in connection with this Agreement and the transactions
contemplated hereby.
7.17 GUARANTY. The Guarantor hereby unconditionally and
irrevocably guarantees to the Sellers the due and punctual performance and
observance by the Purchaser of all its obligations, commitments, undertakings,
warranties and indemnities under, or pursuant to this Agreement and the Note.
7.17.1 The liability of the Guarantor under this Agreement
and the Note shall not be released nor diminished by any variation of the terms
of this Agreement (except as agreed by all parties to this Agreement), any
forbearance, neglect or delay by Sellers in seeking performance of the
obligations hereby imposed or any granting of time for such performance by
Sellers.
-18-
<PAGE> 19
7.17.2 If, and whenever, the Purchaser defaults for any
reason whatsoever in the performance of any obligation or liability undertaken
or expressed to be undertaken by the Purchaser under or pursuant to this
Agreement or the Note, the Guarantor shall forthwith upon demand unconditionally
perform (or prosecute the performance of) and satisfy (or procure the
satisfaction of) the obligation or liability in regard to which such default has
been made in the manner prescribed by this Agreement or the Notes, and so that
the same benefits shall be conferred on the Sellers as they would have received
if such obligation or liability had been duly performed and satisfied by the
Purchaser.
7.17.3 This guaranty is to be a continuing guaranty and
accordingly is to remain in force until all the obligations of the Purchaser
under this Agreement and the Note shall have been performed and satisfied. This
guaranty is in addition to, and without prejudice to, and not in substitution
for, any rights or security which the Sellers may now or hereafter have or hold
for the performance and observance of the obligations, commitments, undertakings
and warranties of the Purchaser under, or in connection with, this Agreement and
the Note.
7.17.4 Notwithstanding any provision hereof to the contrary,
the Guarantor retains and shall have available to it any and all defenses
(arising out of contract law or otherwise, excepting only defenses arising out
of bankruptcy or insolvency law or lack of capacity or authority on the part of
Purchaser) available to the Purchaser against any enforcement of this guaranty
by the Sellers against the Guarantor. This guaranty is intended solely to secure
for the Sellers the Purchaser's performance obligations hereunder and under the
Note. This guaranty is not intended to, it does not, nor shall it be deemed,
construed nor interpreted to, provide any additional rights to Sellers hereunder
or under the Note.
7.18 SELLERS' COMMITTEE. Each Seller hereby authorizes Michael
Johnson, Patrick Drew, Julian St Lawrence and Nigel Miller as the "Sellers'
Committee." Michael Johnson is the initial Chairman of the Sellers' Committee
which is hereby authorized and constituted to (i) receive notices on behalf of
each Seller pursuant to SECTION 8.3, above, (ii) to conduct, on behalf of each
Seller, any and all claims relating to any Warranty, the Tax Covenant or any
Indemnified Liability, and (iii) to provide any consents required or permitted
in this Agreement on behalf of each Seller. With regard to any matter authorized
hereunder to the Sellers' Committee, the Purchaser is entitled to rely
exclusively on such notices, conduct of claims and consents provided by the
Sellers' Committee and is further entitled to disregard any communications from
any individual Seller with respect thereto.
-19-
<PAGE> 20
IN WITNESS WHEREOF, this Agreement has been duly executed and delivered on
May 7, 1998,
Time Eclipse, Limited SI Holding Corporation
an English Corporation, a Delaware Corporation
as Purchaser, as Guarantor,
By: /s/ Joseph L. Sylvia By: /s/ Joseph L. Sylvia
----------------------------- ------------------------------
Joseph L. Sylvia Joseph L. Sylvia
Managing Director Executive Vice President
- ------------------------------------------
Penelope Christine Gaisford St. Lawrence
Howth Castle
County Dublin
Erie
- ------------------------------------------
Platinum Holdings Limited
60 Market Square
P.O. Box 364
Belize, Central America
- ------------------------------------------
Marcris Holdings Limited
c/o Chris R. Bewley
157 Caulder Drive
Oakville, Ontario L6J 4T2 CANADA
- ------------------------------------------
Thomas Nigel Miller
Main Street
Repton
Derbyshire
-20-
<PAGE> 21
- ------------------------------------------
Valerie Drew
31 Allingham Street
Longon Nl 8NX ENGLAND
- ------------------------------------------
Georgina Miller
"Westlands" Upperton Petworth
West Sussex GU28 9BB ENGLAND
- ------------------------------------------
Ronald Francis Kirby
Joylons
Bury near Pulborough
West Sussex RH20 lPF ENGLAND
- ------------------------------------------
Lady Davis
21 Tryon Street, Chelsea
London SW3 3LG ENGLAND
- ------------------------------------------
Joanna Marie Drew
57 St. George's Square
London SW1 U3QN ENGLAND
- ------------------------------------------
Michael Johnson
9 Needham Road
London W11 2RP ENGLAND
-21-
<PAGE> 22
- ------------------------------------------
Timothy Douglas Ian Drew
The Dingle, Crew Lane, Kenilworth
Warwickshire CV8 2DG ENGLAND
- ------------------------------------------
Patrick Arnold Drew
The Yarrows Lodge
17 Church Hill, Camberley
Surrey GU1 52HA ENGLAND
- ------------------------------------------
G. Miller and Dr. T.N. Miller
c/o Geraldine Devine
Palmer Cowen Solicitors
16 Berkeley Street
London W1 5AE ENGLAND
- ------------------------------------------
Dagmar Paton
9 Dealtry Road
London SW15 6NL ENGLAND
- ------------------------------------------
Paul Malcolm Ruse
47 Greyhound Hill
London NW4 4JN ENGLAND
- ------------------------------------------
Bibury Investment Holding Inc.
4 Britannia Place
St. Helier
Jersey JE4 5RE
-22-
<PAGE> 23
- ------------------------------------------
Paul Sewell
16420 Fair Ridge Court
Riverside, CA 92503 USA
- ------------------------------------------
Dennis Stephen Parker
7 Gander Green Lane, Cheam
Surrey ENGLAND
- ------------------------------------------
Kenneth Trickett
Burnham, Barley Mow Road
Englefield Green
Surrey TW20 0NP ENGLAND
- ------------------------------------------
John Greville Drew
1 Greenwood Drive
London E8 lAB ENGLAND
- ------------------------------------------
Timothy John Drew
Flat C, 62 Herman Hill, Wanstead
London E11 1PB ENGLAND
- ------------------------------------------
David Graham Drew
11b Alexandra Road, Windsor
Berks SL4 1JH ENGLAND
-23-
<PAGE> 24
- ------------------------------------------
Marcus Guy Drew
The Magpie, 17 Beechwood Close
Church Crookham, Fleet
Hants GU13 0TT ENGLAND
- ------------------------------------------
Christopher Marcus Roy Drew
Corner Cottage, 13 Benner Lane
West End near Woking
Surrey ENGLAND
- ------------------------------------------
Robin Patrick Barry Drew
17 Petrel Crort, Gold Crest
Kempshott near Basingstoke
Hants ENGLAND
- ------------------------------------------
Sally Elizabeth Drew
31 Chalsey Road
London SE4 1YN ENGLAND
- ------------------------------------------
Simon Drew
BA Randersvej 18
8800 Viborg DENMARK
- ------------------------------------------
M.T. Roxby Bott
Maplewood, Cherry Tree Road
Milford Godalming
Surrey GU8 5AY ENGLAND
-24-
<PAGE> 25
- ------------------------------------------
J.T. Gaisford St. Lawrence
43 Rowan Road
London W6 7DT ENGLAND
- ------------------------------------------
Nicholas Blews Robotham
24 Meenaar Crescent
Coolbinia, Perth 6050
Western Australia
- ------------------------------------------
Mary Thorndike Drew
1 Greenwood Road
London E8 1AB ENGLAND
- ------------------------------------------
Jane Elizabeth Merrick-Johnson
9 Needham Road
London W11 2RP
- ------------------------------------------
Elena F.L. Miller
Laurel Hill, Main Street
Repton
Derbyshire DE65 6FB
- ------------------------------------------
Matthew T.V. Miller
Laurel Hill, Main Street
Repton
Derbyshire DE65 6FB
-25-
<PAGE> 26
- ------------------------------------------
Honor L. Miller
Laurel Hill, Main Street
Repton
Derbyshire DE65 6FB
- ------------------------------------------
David E.B. Miller
Laurel Hill, Main Street
Repton
Derbyshire DE65 6FB
- ------------------------------------------
Avril J.V. Miller
Laurel Hill, Main Street
Repton
Derbyshire DE65 6FB
- ------------------------------------------
Alexander H.J. Miller
Laurel Hill, Main Street
Repton
Derbyshire DE65 6FB
-26-
<PAGE> 1
EXHIBIT 3.1
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
SIMONDS INDUSTRIES INC.
It is hereby certified that:
1. The name of the corporation (hereinafter called the
"Corporation") is Simonds Industries Inc.
2. The certificate of incorporation of the Corporation is hereby
amended by striking out Article FOURTH thereof and by substituting in lieu of
said Article the following new Article:
"FOURTH: The total number of shares which the
Corporation shall have authority to issue is 200,000 shares,
of which 100,000 shares shall be designated as "Class A Common
Stock" and 100,000 shares shall be designated as "Class B
Common Stock." All shares of common stock of the Corporation
currently outstanding are hereby redesignated as Class A
Common Stock. As used herein, the term "Common Stock" shall
mean collectively the Class A Common Stock and the Class B
Common Stock.
The preferences, limitation and relative rights relating
to the Class A Common Stock and the Class B Common Stock are
as follows:
1. PAR VALUE. The par value of the Class A Common Stock
and the Class B Common Stock shall be $0.01 per share.
2. RANKING. Except with respect to voting rights, the
Class A Common Stock and the Class B Common Stock shall in all
respects have the same powers, preferences, rights and
qualification (including dividend rights and rights on
liquidation, dissolution and winding up) and shall rank PARI
PASSU with each other.
<PAGE> 2
3. VOTING RIGHTS. Except as otherwise expressly
provided herein or as required by law, the holders of the
Class A Common Stock shall have the right to vote on all
corporate matters for which a vote of the shareholders of the
Corporation is taken, and each share of Class A Common Stock
shall be entitled to one vote. Except as otherwise expressly
provided herein or as required by law, the holders of the
Class B Common Stock shall have no right to vote on any
corporate matters for which a vote of the shareholders of the
Corporation is taken.
4. CONVERSION
a. Any holder of Class B Common Stock shall have
the right, at its option, at any time and from time to time,
to convert, subject to the terms and provisions of this
paragraph 4, any or all of such holder's shares of Class B
Common Stock into fully paid and non-assessable shares of
Class A Common Stock at the rate (subject to adjustment as
provided below) of one share of Class A Common Stock for each
share of Class B Common Stock surrendered for conversion;
PROVIDED, HOWEVER, that if the holder in any such conversion
is subject to the Bank Holding Company Act of 1956, as amended
(12 U.S.C. ss.1841, ET. SEQ.) and the regulations promulgated
thereunder (collectively and including any successor
provisions, the "BHCA Act"), such conversion may be made only
if (i) the BHCA Act would not prohibit such holder from
holding such shares of Class A Common Stock and (ii) such
shares of Class A Common Stock to be received upon such
conversion will be distributed or sold (A) in connection with
any public equity offering registered under the Securities Act
of 1933, as amended, and the rules and regulations promulgated
thereunder (the "Securities Act"), (B) in a "broker's
transaction" (as defined in Rule 144(g) under the Securities
Act) pursuant to Rule 144 under the Securities Act or any
similar rule then in force, (C) to a person or group (within
the meaning of the Securities Exchange Act of 1934 (the
"Exchange Act")) of persons if, after such distribution or
sale, such person or group of persons would not, in the
aggregate, own, control or have the right to acquire more than
2% of the outstanding securities of the Corporation entitled
to vote on the election of directors of the Corporation, (D)
to a person or group
-2-
<PAGE> 3
(within the meaning of the Exchange Act) of persons if, prior
to such sale, such persons or group of persons had control of
the Corporation, or (E) in any other manner permitted under
the BHCA, PROVIDED, FURTHER, that if the holder converts any
shares of the Class B Common Stock as provided in clauses (i)
and (ii) above and any distribution or sale of the Class A
Common Stock fails to occur for any reason, such holder may
convert the Class A Common Stock into the Class B Common Stock
converted in anticipation of such distribution or sale. Any
holder of Class A Common Stock that is subject to the BHCA Act
shall also have the right, at its option, at any time and from
time to time, to convert, subject to the terms of this
paragraph 4, any or all of such holder's shares of Class A
Common Stock into fully paid and non-assessable shares of
Class B Common Stock at the rate (subject to adjustment as
provided below) of one share of Class B Common Stock for each
share of Class A Common Stock surrendered for conversion;
PROVIDED; HOWEVER, that such conversion shall be made only if
such holder has determined and certified to the corporation
that such conversion is necessary to reduce such holder's
holdings of the Class A Common Stock to a number of shares of
Class A Common Stock (if any) then permitted to be held by
such holder under the BHCA Act.
b. Such conversion right shall be exercised by the
surrender to the Corporation of the shares of the applicable
Common Stock to be converted in the manner provided above at
any time during usual business hours at its principal place of
business, accompanied by (i) written notice that the holder
elects to convert such shares of Common Stock and specifying
the name or names (with address) in which a certificate or
certificates for shares of such Common Stock are to be issued;
(ii) if so required by the Corporation, a written instrument
or instruments of transfer in form reasonably satisfactory to
the Corporation duly executed by the holder or its duly
authorized legal representative; (iii) transfer tax stamps or
funds therefor, if required pursuant to paragraph 4(d), and
(iv) a certificate in form satisfactory to the Corporation
stating that the holder has satisfied all applicable
conditions to conversion, including without limitation the
restrictions described in paragraph 4(a), and the Corporation
may rely upon such Certificate as to the holder's compliance
with any such conditions or restrictions without any
investigation by the
-3-
<PAGE> 4
Corporation as to such matters. As promptly as practicable
after the surrender, as herein provided, of any shares of
Common Stock for conversion pursuant to paragraph 4(a), the
Corporation shall deliver to or upon the written order of the
holder of such shares of Common Stock so surrendered a
certificate or certificates representing the number of fully
paid and non-assessable shares of the Common Stock into which
such shares of Common Stock may be or have been converted in
accordance with the provisions of this paragraph 4. Such
conversion shall be deemed to have been made immediately prior
to the close of business on the date that such shares of
Common Stock shall have been surrendered in satisfactory form
for conversion, and the person or persons entitled to receive
the shares of Common Stock deliverable upon conversion of such
shares of Common Stock shall be treated for all purposes as
having become the record holder or holders of such shares of
Common Stock at such appropriate time. Notwithstanding the
foregoing, a holder's identification of the person or persons
entitled to receive any shares of Common Stock deliverable
upon conversion shall not be deemed an approval by the
Corporation of a transfer or conversion that would result in a
violation of any applicable law or restriction on transfer or
conversion and shall not be deemed a waiver by the Corporation
or any other person of any right or restriction regarding any
such transfer or conversion.
c. So long as shares of each of the Class A Common
Stock and Class B Common Stock are outstanding or authorized
or reserved for issuance, the Corporation shall not effect any
stock split, stock dividend, reclassification, reorganization,
recapitalization or consolidation of Class A or Class B Common
Stock, unless the Corporation shall also contemporaneously
effect a stock split, stock dividend, reclassification,
reorganization or consolidation on the same terms with respect
to the other class of Common Stock. The Corporation will not,
by amendment of its Certificate of Incorporation or through
any reorganization, transfer of assets, consolidation, merger,
share exchange, dissolution, issue or sale of securities or
any other voluntary action, avoid or seek to avoid the
observance or performance of any of the terms to be observed
or performed hereunder by the Corporation, including without
limitation the adjustments required under this paragraph 4,
and will at all times in good faith assist in the carrying out
of all the provisions of this paragraph 4 and in the taking of
all such action as may be necessary
-4-
<PAGE> 5
or appropriate in order to protect the conversion rights of
the holders of Common Stock against dilution or other
impairment.
d. The Corporation shall pay any and all issue and
other taxes that may be payable in respect of any issue or
delivery of shares of Common Stock on conversion of shares of
Class A or Class B Common Stock pursuant thereto; PROVIDED,
that the Corporation shall not be obligated to pay any
transfer taxes resulting from any transfer requested by any
holder in connection with any such conversion.
e. The Corporation shall at all times reserve and keep
available out of its authorized but unissued shares of Class A
and Class B Common Stock, free of preemptive rights, solely
for the purpose of effecting the conversion of the shares of
Common Stock, such number of its shares of Class A and Class B
Common Stock as shall from time to time be sufficient to
effect the conversion of all outstanding shares of each class
into the other class; and if at any time the number of
authorized by unissued shares of each class shall not be
sufficient to effect the conversion of all then outstanding
shares of the other class, the Corporation will take such
corporate action as may, in the opinion of its counsel, be
necessary to increase its authorized by unissued shares of
Class A or Class B Common Stock, as the case may be, to such
number of shares as shall be sufficient for such purpose,
including, without limitation, engaging in best efforts to
obtain the requisite shareholder approval of any necessary
amendment to this Certificate of Incorporation.
f. In case of any recapitalization, reorganization or
reclassification of the capital stock of the Corporation, any
consolidation or merger of the Corporation with or into
another entity, any acquisition of shares of the capital stock
of the Corporation in a share exchange, or the sale, lease or
other disposition of all or substantially all of the assets of
the Corporation, each share of Class B Common Stock shall
thereafter be convertible into the number of shares of stock
or other securities or property (including cash) to which a
holder of the number of shares of Class A Common Stock
deliverable upon conversion of such share of Class B Common
Stock would have been entitled upon the record date of (or
date of, if no record date is fixed) such recapitalization,
reorganization, reclassification, consolidation, merger, share
exchange, sale, lease or other disposition and, in any case,
appropriate adjustment (as determined by the Board of
Directors) shall be made in the application of the provisions
herein set forth with respect to the rights and interests
thereafter of the holders of such Class B Common Stock, to the
end that the provisions set forth herein shall thereafter be
-5-
<PAGE> 6
applicable, as nearly as equivalent as is practicable, in
relation to any shares of stock or the securities or property
(including cash) thereafter deliverable upon the conversion of
the shares of Class B Common Stock."
3. The amendment of the certificate of incorporation herein certified has
been duly adopted in accordance with the provisions of Section 242 of the
General Corporation Law of the State of Delaware.
4. The effective date and time of the amendment herein certified
shall be July 7, 1998 at 10:00 a.m.
IN WITNESS WHEREOF, said Simonds Industries Inc. has caused this
certificate to be executed by Ross B. George, its President and attested by
David P. Witman, its Secretary this 6th day of July, 1998.
SIMONDS INDUSTRIES INC.
By: /s/ Ross B. George
---------------------------------------
Ross B. George, President
ATTEST:
By: /s/ David P. Witman
-------------------------------
David P. Witman, Secretary
-6-
<PAGE> 7
CERTIFICATE OF OWNERSHIP AND MERGER
OF
SIMONDS INDUSTRIES INC.
(a Delaware corporation)
INTO
SI HOLDING CORPORATION
(a Delaware corporation)
It is hereby certified that:
1. SI Holding Corporation (the "Corporation") is a business corporation
of the State of Delaware.
2. The Corporation is the owner of all of the outstanding shares of the
common stock of Simonds Industries Inc., which is also a business corporation of
the State of Delaware ("Simonds Industries").
3. On June 11, 1998, the Board of Directors of the Corporation adopted
the following resolutions to merge Simonds Industries into the Corporation:
RESOLVED: That Simonds Industries be merged into the Corporation, and
that all of the estate, property, rights, privileges, powers and
franchises of Simonds Industries be vested in and held and enjoyed by
the Corporation as fully and entirely and without change or diminution
as the same were before held and enjoyed by Simonds Industries in its
name.
RESOLVED: That the Corporation shall assume all of the obligations of
Simonds Industries.
RESOLVED: That the Corporation shall cause to be executed and filed
and/or recorded the documents prescribed by the laws of the State of
Delaware and by the laws of any other appropriate jurisdiction and
will cause to be performed all necessary acts within the State of
Delaware and within any other appropriate jurisdiction.
RESOLVED: That the Corporation shall change its corporate name to
"Simonds Industries Inc."
-7-
<PAGE> 8
RESOLVED: That the effective time of the Certificate of Ownership and
Merger setting forth a copy of these resolutions shall be upon filing
with the Delaware Secretary of State, and that, insofar as the General
Corporation Law of the State of Delaware shall govern the same, said
time shall be the effective merger time.
IN WITNESS WHEREOF, the undersigned has caused this Certificate of
Ownership and Merger to be duly executed as of the 11th day of June, 1998.
SI HOLDING CORPORATION
By: /s/ Ross B. George
--------------------------
Name: Ross B. George
Title: President/CEO
-8-
<PAGE> 9
CERTIFICATE
FOR RENEWAL AND REVIVAL OF CERTIFICATE OF INCORPORATION
SI Holding Corporation, a corporation organized under the laws of Delaware,
the Certificate of Incorporation of which was filed in the office of the
Secretary of State on the 16th Day of May, 1995 and thereafter voided for
non-payment of taxes, new desiring to procure a revival of its Certificate of
Incorporation, hereby certifies as follows:
1. The name of the corporation is SI Holding Corporation.
2. Its registered office in the State of Delaware is located at Corporation
Trust Center, 1209 Orange Street, City of Wilmington, County of new Castle and
the name of its registered agent at such address is The Corporation Trust
Company.
3. The date when revival of the Certificate of Incorporation of this
corporation is to commence is the 28th day of February, 1997. Revival of the
Certificate of Incorporation is to be perpetual.
4. This corporation was duly organized under the laws of Delaware and
carried on the business authorized by its Certificate of Incorporation until the
1st day of March, 1997 at which time its Certificate of Incorporation became
inoperative and void for non-payment of taxes and this Certificate for Renewal
and Revival is filed by authority of the duly elected directors of the
corporation in accordance with the laws of Delaware.
IN WITNESS WHEREOF, said SI Holding Corporation in compliance with Section
312 of Title 8 of the Delaware Code has caused this Certificate to be signed by
Ross B. George, its last acting President, this 31st day of July, 1997.
SI Holding Corp.
By /s/ Ross B. George
----------------------------
Ross B. George
-9-
<PAGE> 10
CERTIFICATE OF INCORPORATION
OF
SI HOLDING CORPORATION
FIRST. The name of the corporation is SI Holding Corporation.
SECOND. The address of the corporation's registered office in the
State of Delaware is Corporation Trust Center, 1209 Orange Street, Wilmington,
New Castle County, Delaware. The name of its registered agent at such address is
The Corporation Trust Company.
THIRD. The purpose of the corporation is to engage in any lawful act
or activity for which corporations may be organized under the General
Corporation Law of Delaware.
FOURTH. The total number of shares which the corporation shall have
authority to issue is 200,000 shares of common capital stock, $.01 par value
each.
FIFTH. The name and mailing address of the incorporator is Kristin A.
DeKuiper, Esq., Hinckley, Allen & Snyder, 1500 Fleet Center, Providence, Rhode
Island 02903.
SIXTH. The powers of the incorporator are to terminate upon the
filing of the Certificate of Incorporation, and the names and mailing addresses
of the persons who are to serve as directors until the first annual meeting of
stockholders or until their successors are elected and qualified are:
NAME ADDRESS
Habib Y. Gorgi 111 Westminster St., 4th Floor
Providence, RI 02903
Bernard V. Buonanno III 111 Westminster St., 4th Floor
Providence, RI 02903
SEVENTH. The corporation is to have perpetual existence.
EIGHTH. The board of directors of the corporation are expressly
authorized to make, alter, restate or repeal by-laws of the corporation.
NINTH. Elections of directors need not be by written ballot except
and to the extent provided in the by-laws of the corporation.
TENTH. The personal liability of any director to the corporation or
its stockholders for monetary damages arising as a result of the director's
breach of his or her fiduciary duty as a director is hereby eliminated. Nothing
in this provision shall be construed as eliminating the
-10-
<PAGE> 11
liability of the director (i) for any breach of the director's duty of loyalty
to the corporation nor its stockholders, (ii) for acts or omissions not in good
faith or which involve intentional misconduct or a knowing violation of law,
(iii) under Section 174 of the General Corporation Law of the State of Delaware,
or (iv) for any transaction from which the officer derived an improper personal
benefit.
ELEVENTH. Meetings of stockholders may be held within or without the
State of Delaware, as the by-laws may provide. The books of the corporation may
be kept (subject to any provisions contained in the statutes) outside the State
of Delaware at such place or places as may be designated from time to time by
the board of directors or in the by-laws of the corporation.
TWELFTH. The corporation reserves the right to amend, alter, change or
repeal any provision contained in this Certificate of Incorporation, in the
manner now or hereafter prescribed by statute, and all rights conferred upon
stockholders herein are granted subject to this reservation.
The undersigned incorporator hereby acknowledges that the foregoing
Certificate of Incorporation is her free act and deed and that the facts stated
therein are true.
/s/ Kristin A. DeKuiper
----------------------------------
Kristin A. DeKuiper,
Incorporator
STATE OF RHODE ISLAND
COUNTY OF PROVIDENCE
On the 16th day of May, 1995, before me personally came Kristin A.
DeKuiper, known to me to be the individual described in and who acknowledged the
foregoing instrument and swore and acknowledged that she executed the same as
her free act and deed.
/s/ Laurie C. [Wilkinson]
Notary Public
My Commission Expires: 6/25/95
-11-
<PAGE> 1
EXHIBIT 3.2
BY - LAWS
OF
SIMONDS INDUSTRIES INC.
ARTICLE I
OFFICES
SECTION 1. The registered office shall be in the City of Wilmington,
County of New Castle, State of Delaware.
SECTION 2. The corporation may also have offices at such other places
both within and without the State of Delaware as the board of directors may from
time to time determine or the business of the corporation may require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
SECTION 1. All meetings of the stockholders for the election of
directors shall be held in the City of Wilmington at such place as may be fixed
from time to time by the board of directors, or at such other place either
within or without the State of Delaware as shall be designated from time to time
by the board of directors and stated in the notice of the meeting. Meetings of
stockholders for any other purpose may be held at such time and place, within or
without the State of Delaware, as shall be stated in the notice of the meeting
or in a duly executed waiver of notice thereof.
SECTION 2. Annual meetings of stockholders, commencing with the year
1995 shall be held on the first Monday in May, if not a legal holiday, and if a
legal holiday, then on the next secular day following, at 10:00 A.M., or at such
other date and time as shall be designated from
<PAGE> 2
time to time by the board of directors and stated in the notice of the meeting,
at which they shall elect by a plurality vote a board of directors, and transact
such other business as may properly be brought before the meeting.
SECTION 3. Written notice of the annual meeting stating the place, date
and hour of the meeting shall be given to each stockholder entitled to vote at
such meeting not less than ten nor more than fifty days before the date of the
meeting.
SECTION 4. The officer who has charge of the stock ledger of the
corporation shall prepare and make, at least ten days before every meeting of
stockholders, a complete list of the stockholders entitled to vote at the
meeting, arranged in alphabetical order, and showing the address of each
stockholder and the number of shares registered in the name of each stockholder.
Such list shall be open to the examination of any stockholder, for any purpose
germane to the meeting, during ordinary business hours, for a period of at least
ten days prior to the meeting, either at a place within the city where the
meeting is to be held, which place shall be specified in the notice of the
meeting, or, if not so specified, at the place where the meeting is to be held.
The list shall also be produced and kept at the time and place of the meeting
during the whole time thereof, and may be inspected by any stockholder who is
present.
SECTION 5. Special meetings of the stockholders, for any purpose or
purposes, unless otherwise prescribed by statute or by the certificate of
incorporation, may be called by the president and shall be called by the
president or secretary at the request in writing of a majority of the board of
directors, or at the request in writing of stockholders owning a majority in
amount of the entire capital stock of the corporation issued and outstanding and
entitled to vote. Such request shall state the purpose or purposes of the
proposed meeting.
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SECTION 6. Written notice of a special meeting stating the place, date
and hour of the meeting and the purpose or purposes for which the meeting is
called, shall be given not less than ten nor more than fifty days before the
date of the meeting, to each stockholder entitled to vote at such meeting.
SECTION 7. Business transacted at any special meeting of stockholders
shall be limited to the purposes stated in the notice.
SECTION 8. The holders of a majority of the stock issued and outstanding
and entitled to vote thereat, present in person or represented by proxy, shall
constitute a quorum at all meetings of the stockholders for the transaction of
business except as otherwise provided by statute or by the certificate of
incorporation. If, however, such quorum shall not be present or represented at
any meeting of the stockholders, the stockholders entitled to vote thereat,
present in person or represented by proxy, shall have power to adjourn the
meeting from time to time, without notice other than announcement at the
meeting, until a quorum shall be present or represented. At such adjourned
meeting at which a quorum shall be present or represented any business may be
transacted which might have been transacted at the meeting as originally
notified. If the adjournment is for more than thirty days, or if after the
adjournment a new record date is fixed for the adjourned meeting, a notice of
the adjourned meeting shall be given to each stockholder of record entitled to
vote at the meeting.
SECTION 9. When a quorum is present at any meeting, the vote of the
holders of a majority of the stock having voting power present in person or
represented by proxy shall decide any question brought before such meeting,
unless the question is one upon which by express provisions of the statutes or
of the certificate of incorporation, a different vote is required in which case
such express provisions shall govern and control the decision of such question.
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SECTION 10. Unless otherwise provided in the certificate of
incorporation each stockholder shall at every meeting of the stockholders be
entitled to one vote in person or by proxy for each share of the capital stock
having voting power held by such stockholder, but no proxy shall be voted on
after three years from its date, unless the proxy provides for a longer period.
SECTION 11. Unless otherwise provided in the certificate of
incorporation, any action required to be taken at any annual or special meeting
of stockholders of the corporation, or any action which may be taken at any
annual or special meeting of such stockholders, may be taken without a meeting,
without prior notice and without a vote, if a consent in writing, setting forth
the action so taken, shall be signed by the holders of outstanding stock having
not less than the minimum number of votes that would be necessary to authorize
or take such action at a meeting at which all shares entitled to vote thereon
were present and voted. Prompt notice of the taking of the corporate action
without a meeting by less than unanimous written consent shall be given to those
stockholders who have not consented in writing.
ARTICLE III
DIRECTORS
SECTION 1. The number of directors which shall constitute the whole
board shall not be less than two nor more than seven. The initial board shall
consist of five directors. Thereafter, within the limits above specified, the
number of directors shall be determined by resolution of the board of directors
or by the stockholders at the annual meeting. The directors shall be elected at
the annual meeting of the stockholders, except as provided in Section 2 of this
Article, and
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each director elected shall hold office until his successor is elected and
qualified. Directors need not be stockholders.
SECTION 2. Vacancies and newly created directorships resulting from any
increase in the authorized number of directors may be filled by a majority of
the directors then in office, though less than a quorum, or by a sole remaining
director, and the directors so chosen shall hold office until the next annual
election and until their successors are duly elected and shall qualify, unless
sooner displaced. If there are no directors in office, then an election of
directors may be held in the manner provided by statute. If, at the time of
filling any vacancy or any newly created directorship, the directors then in
office shall constitute less than a majority of the whole board (as constituted
immediately prior to any such increase), the Court of Chancery may, upon
application of any stockholder or stockholders holding at least ten per cent of
the total number of the shares at the time outstanding having the right to vote
for such directors, summarily order an election to be held to fill any such
vacancies or newly created directorships, or to replace the directors chosen by
the directors then in office.
SECTION 3. The business of the corporation shall be managed by its board
of directors which may exercise all such powers of the corporation and do all
such lawful acts and things as are not by statute or by the certificate of
incorporation or by these by-laws directed or required to be exercised or done
by the stockholders.
SECTION 4. The board of directors of the corporation may hold meetings,
both regular and special, either within or without the State of Delaware.
SECTION 5. The first meeting of each newly elected board of directors
shall be held at such time and place as shall be fixed by the vote of the
stockholders at the annual meeting and no notice of such meeting shall be
necessary to the newly elected directors in order legally to
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constitute the meeting, provided a quorum shall be present. In the event of the
failure of the stockholders to fix the time or place of such first meeting of
the newly elected board of directors, or in the event such meeting is not held
at the time and place so fixed by the stockholders, the meeting may be held at
such time and place as shall be specified in a notice given as hereinafter
provided for special meetings of the board of directors, or as shall be
specified in a written waiver signed by all of the directors.
SECTION 6. Regular meetings of the board of directors may be held
without notice at such time and at such place as shall from time to time be
determined by the board.
SECTION 7. Special meetings of the board may be called by the president
on two days' notice to each director, either personally or by mail or by
telegram. Special meetings shall be called by the president or secretary in like
manner and on like notice on the written request of two directors.
SECTION 8. At all meetings of the board a majority of the number of
directors fixed pursuant to Section 2 of this Article shall constitute a quorum
for the transaction of business and the act of a majority of the directors
present at any meeting at which there is a quorum shall be the act of the board
of directors, except as may be otherwise specifically provided by statute or by
the certificate of incorporation. If a quorum shall not be present at any
meeting of the board of directors the directors present thereat may adjourn the
meeting from time to time, without notice other than announcement at the meeting
until a quorum shall be present.
SECTION 9. Unless otherwise restricted by the certificate of
incorporation or these by-laws, any action required or permitted to be taken at
any meeting of the board of directors or of any committee thereof may be taken
without a meeting, if all members of the board or
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committee, as the case may be, consent thereto in writing, and the writing or
writings are filed with the minutes of proceedings of the board or committee.
SECTION 10. The board of directors may, by resolution passed by a
majority of the whole board, designate one or more committees, each committee to
consist of one or more of the directors of the corporation. The board may
designate one or more directors as alternate members of any committee, who may
replace any absent or disqualified member at any meeting of the committee. In
the absence or disqualification of a member of a committee, the member or
members thereof present at any meeting and not disqualified from voting, whether
or not he or they constitute a quorum, may unanimously appoint another member of
the board of directors to act at the meeting in the place of any such absent or
disqualified member. Any such committee, to the extent provided in the
resolution of the board of directors, shall have and may exercise all the powers
and authority of the board of directors in the management of the business and
affairs of the corporation, and may authorize the seal of the corporation to be
affixed to all papers which may require it; but no such committee shall have the
power or authority in reference to amending the certificate of incorporation,
adopting an agreement of merger or consolidation, recommending to the
stockholders the sale, lease or exchange of all or substantially all of the
corporation's property and assets, recommending to the stockholders a
dissolution of the corporation or a revocation of a dissolution, or amending the
by-laws of the corporation; and, unless the resolution or the certificate of
incorporation expressly so provides, no such committee shall have the power or
authority to declare a dividend or to authorize the issuance of stock. Such
committee or committees shall have such name or names as may be determined from
time to time by resolution adopted by the board of directors.
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SECTION 11. Each committee shall keep regular minutes of its meetings
and report the same to the board of directors when required.
SECTION 12. Unless otherwise restricted by the certificate of
incorporation, the board of directors shall have the authority to fix the
compensation of directors. The directors may be paid their expenses, if any, of
attendance at each meeting of the board of directors and may be paid a fixed sum
for attendance at each meeting of the board of directors or a stated salary as
director. No such payment shall preclude any director from serving the
corporation in any other capacity and receiving compensation therefor. Members
of special or standing committees may be allowed like compensation for attending
committee meetings.
ARTICLE IV
NOTICES
SECTION 1. Whenever, under the provisions of the statutes or of the
certificate of incorporation or of these by-laws, notice is required to be given
to any director or stockholder, it shall not be construed to mean personal
notice, but such notice may be given in writing, by mail, addressed to such
director or stockholder, at his address as it appears on the records of the
corporation, with postage thereon prepaid, and such notice shall be deemed to be
given at the time when the same shall be deposited in the United States mail.
Notice to directors may also be given by telegram.
SECTION 2. Whenever any notice is required to be given under the
provisions of the statutes or of the certificate of incorporation or of these
by-laws, a waiver thereof in writing, signed by the person or persons entitled
to said notice, whether before or after the time stated therein, shall be deemed
equivalent thereto.
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ARTICLE V
OFFICERS
SECTION 1. The officers of the corporation shall be chosen by the board
of directors and shall be a chairman, a chief executive officer, a president, a
vice-president, a secretary and a treasurer. The board of directors may also
choose additional vice-presidents, and one or more assistant secretaries and
assistant treasurers. Any number of offices may be held by the same person,
unless the certificate of incorporation or these by-laws otherwise provide.
SECTION 2. The board of directors at its first meeting after each annual
meeting of stockholders shall choose a president, one or more vice-presidents, a
secretary and a treasurer.
SECTION 3. The board of directors may appoint such other officers and
agents as it shall deem necessary who shall hold their offices for such terms
and shall exercise such powers and perform such duties as shall be determined
from time to time by the board.
SECTION 4. The salaries of all officers and agents of the corporation
shall be fixed by the board of directors.
SECTION 5. The officers of the corporation shall hold office until their
successors are chosen and qualify. Any officer elected or appointed by the board
of directors may be removed at any time by the affirmative vote of a majority of
the board of directors. Any vacancy occurring in any office of the corporation
shall be filled by the board of directors.
SECTION 6. The president shall be the principal executive officer of the
corporation and shall supervise and conduct the business and affairs of the
corporation. The other officers of the corporation shall have the powers and
shall perform the duties customarily appurtenant to their respective offices,
and shall have such further powers and shall perform such further duties as
shall be from time to time assigned to them by the board of directors.
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ARTICLE VI
CERTIFICATES OF STOCK
SECTION 1. Every holder of stock in the corporation shall be entitled to
have a certificate, signed by, or in the name of the corporation by, the
president or vice-president and the treasurer or an assistant treasurer, or the
secretary or an assistant secretary of the corporation, certifying the number of
shares owned by him in the corporation.
SECTION 2. Where a certificate is countersigned (1) by a transfer agent
other than the corporation or its employee, or, (2) by a registrar other than
the corporation or its employee, any other signature on the certificate may be
facsimile. In case any officer, transfer agent or registrar who has signed or
whose facsimile signature has been placed upon a certificate shall have ceased
to be such officer, transfer agent or registrar before such certificate is
issued, it may be issued by the corporation with the same effect as if he were
such officer, transfer agent or registrar at the date of issue.
SECTION 3. The board of directors may direct a new certificate or
certificates to be issued in place of any certificate or certificates
theretofore issued by the corporation alleged to have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the person claiming
the certificate of stock to be lost, stolen or destroyed. When authorizing such
issue of a new certificate or certificates, the board of directors may, in its
discretion and as a condition precedent to the issuance thereof, require the
owner of such lost, stolen or destroyed certificate or certificates, or his
legal representative, to advertise the same in such manner as it shall require
and/or to give the corporation a bond in such sum as it may direct as indemnity
against any claim that may be made against the corporation with respect to the
certificate alleged to have been lost, stolen or destroyed.
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SECTION 4. Upon surrender to the corporation or the transfer agent of
the corporation of a certificate for shares duly endorsed or accompanied by
proper evidence of succession, assignment or authority to transfer, it shall be
the duty of the corporation to issue a new certificate to the person entitled
thereto, cancel the old certificate and record the transaction upon its books.
SECTION 5. In order that the corporation may determine the stockholders
entitled to notice of or to vote at any meeting of stockholders or any
adjournment thereof, or to express consent to corporation action in writing
without a meeting, or entitled to receive payment of any dividend or other
distribution or allotment of any rights, or entitled to exercise any rights in
respect of any change, conversion or exchange of stock or for the purpose of any
other lawful action, the board of directors may fix, in advance, a record date,
which shall not be more than sixty nor less than ten days before the date of
such meeting, nor more than sixty days prior to any other action. A
determination of stockholders of record entitled to notice of or to vote at a
meeting of stockholders shall apply to any adjournment of the meeting; provided,
however, that the board of directors may fix a new record date for the adjourned
meeting.
SECTION 6. The corporation shall be entitled to recognize the exclusive
right of a person registered on its books as the owner of shares to receive
dividends, and to vote as such owner, and to hold liable for calls and
assessments a person registered on its books as the owner of shares, and shall
not be bound to recognize any equitable or other claim to or interest in such
share or shares on the part of any other person, whether or not it shall have
express or other notice thereof, except as otherwise provided by the laws of
Delaware.
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ARTICLE VII
INDEMNIFICATION
SECTION 1. THIRD PARTY ACTIONS. The corporation shall indemnify any
person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative (other than an action by or in the
right of the corporation) by reason of the fact that he is or was a director,
officer, employee or agent of the corporation, or is or was serving at the
request of the corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise (each an
"Indemnitee"), against expenses (including attorney's fees), judgments, fines
and amounts paid in settlement actually and reasonably incurred by him in
connection with such action, suit or proceeding.
SECTION 2. DERIVATIVE ACTIONS. The corporation shall indemnify any
person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action or suit by or in the right of the
corporation to procure a judgment in its favor by reason of the fact that he is
or was a director, officer, employee or agent of the corporation, or is or was
serving at the request of the corporation as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust or other
enterprise against expenses (including attorneys' fees) actually and reasonably
incurred by him in connection with the defense or settlement of such action or
suit.
SECTION 3. EXPENSES. To the extent that a director, officer, employee or
agent of the corporation has been successful on the merits or otherwise in
defense of any action, suit or proceeding referred to in Sections 1 and 2 of
this Article, or in defense of any claim, issue or
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matter therein, he shall be indemnified against expenses (including attorneys'
fees) actually and reasonably incurred by him in connection therewith.
SECTION 4. AUTHORIZATION AND REQUEST FOR INDEMNIFICATION.
(a) Any indemnification requested by the Indemnitee under Section 1
hereof shall be made no later than ten (10) days after receipt of the written
request of the Indemnitee, unless it shall have been adjudicated by a court of
final determination that the Indemnitee did not act in good faith and in a
manner he reasonably believed to be in, or not opposed to, the best interests of
the corporation, and with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful.
(b) Any indemnification requested by the Indemnitee under Section 2
hereof shall be made no later than ten (10) days after receipt of the written
request of the Indemnitee, unless it shall have been adjudicated by a court of
final determination that the Indemnitee did not act in good faith and in a
manner he reasonably believed to be in or not opposed to, the best interests of
the corporation, the Indemnitee shall have been finally adjudged to be liable to
the corporation by a court of competent jurisdiction due to willful misconduct
of a culpable nature in the performance of the Indemnitee's duty to the
corporation unless and only to the extent that any court in which such
proceeding was brought shall determine upon application that despite the
adjudication of liability, but in view of all the circumstances of the case,
such person is fairly and reasonably entitled to indemnity for such expenses as
such court shall deem proper.
SECTION 5. ADVANCE PAYMENT OF EXPENSES. Subject to Section 4 hereof, the
corporation shall advance all expenses incurred by the Indemnitee in connection
with the investigation, defense, settlement or appeal of any proceeding to which
the Indemnitee is a party or is threatened to be made a party by reason of the
fact that the Indemnitee is or was an agent of the
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corporation. The Indemnitee hereby undertakes to repay such amounts advanced
only if, and to the extent that, it shall ultimately be determined that the
Indemnitee is not entitled to be indemnified by the corporation. The advances to
be made hereunder shall be paid by the corporation to or on behalf of the
Indemnitee within 30 days following delivery of a written request therefor by
the Indemnitee to the corporation.
SECTION 6. NON-EXCLUSIVENESS. The indemnification provided by this
Article VII shall not be deemed exclusive of any other rights to which those
seeking indemnification may be entitled under any by-law, agreement, vote of
stockholders or disinterested directors or otherwise, both as to action in his
official capacity and as to action in another capacity while holding such
office, and shall continue as to a person who has ceased to be a director,
officer, employee or agent and shall inure to the benefit of the heirs,
executors and administrators of such a person.
SECTION 7. INSURANCE. The corporation shall have power to purchase and
maintain insurance on behalf of any person who is or was a director, officer,
employee or agent of the corporation, or is or was serving at the request of the
corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise against any liability
asserted against him and incurred by him in any such capacity, or arising out of
his status as such, whether or not the corporation would have the power to
indemnify him against such liability under the provisions of this Article VII.
SECTION 8. CONSTITUENT CORPORATIONS. The corporation shall have power to
indemnify any person who is or was a director, officer, employee or agent of a
constituent corporation absorbed in a consolidation or merger with this
corporation or is or was serving at the request of such constituent corporation
as a director, officer, employee or agent of another corporation,
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partnership, joint venture, trust or other enterprise in the same manner as
hereinabove provided for any person who is or was a director, officer, employee
or agent of the corporation, or is or was serving at the request of the
corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise.
ARTICLE VIII
GENERAL PROVISIONS
SECTION 1. Dividends upon the capital stock of the corporation, subject
to the provisions of the certificate of incorporation, if any, may be declared
by the board of directors at any regular or special meeting, pursuant to law.
Dividends may be paid in cash, in property, or in shares of the capital stock,
subject to the provisions of the certificate of incorporation.
SECTION 2. Before payment of any dividend, there may be set aside out of
any funds of the corporation available for dividends such sum or sums as the
directors from time to time, in their absolute discretion, think proper as a
reserve or reserves to meet contingencies, or for equalizing dividends, or for
repairing or maintaining any property of the corporation, or for such other
purpose as the directors shall think conducive to the interest of the
corporation, and the directors may modify or abolish any such reserve in the
manner in which it was created.
SECTION 3. All checks or demands for money and notes of the corporation
shall be signed by such officer or officers or such other person or persons as
the board of directors may from time to time designate.
SECTION 4. The fiscal year of the corporation shall be fixed by
resolution of the board of directors.
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SECTION 5. The corporate seal shall be in the form of a circle with the
name of the corporation, the words "Incorporated Delaware" and the year of its
incorporation inscribed therein. The seal may be used by causing it or a
facsimile thereof to be impressed or affixed or reproduced or otherwise.
ARTICLE IX
AMENDMENTS
SECTION 1. These by-laws may be altered, amended or repealed or new
by-laws may be adopted by the stockholders or by the board of directors, when
such power is conferred upon the board of directors by the certificate of
incorporation, at any regular meeting of the stockholders or of the board of
directors or at any special meeting of the stockholders or of the board of
directors if notice of such alteration, amendment, repeal or adoption of new
by-laws be contained in the notice of such special meeting.
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EXHIBIT 3.3
KNOW ALL MEN BY THESE PRESENTS, That we, E.P. Armstrong, J.M. Crook and
Clarence H. Gilbert, do hereby associate ourselves together for the purpose of
forming a private corporation under the laws of the State of Oregon, to engage
in the enterprise, business, pursuit and occupation hereinafter mentioned and do
hereby adopt the following Articles of Incorporation, to-wit:
I
The name of this corporation and by which it shall be known is the
ARMSTRONG MANUFACTURING COMPANY and its duration shall be perpetual.
II
The enterprise, business, pursuit and occupation in which this
corporation proposes to engage is to conduct and carry on the business of buying
and selling machinery, new or second hand, of every kind and description; to buy
and sell goods, wares and merchandise; to accept goods upon consignment, with
the right to obtain and dispose of goods, wares and merchandise in any way,
share or manner; to manufacture and dispose of machinery, goods, wares and
merchandise of every kind and description; to buy and sell, lease or mortgage
real estate or personal property; to borrow money, either upon security or
otherwise and to give the note of this corporation for the same; to execute
notes, bonds, mortgages, evidence of indebtedness of every kind and description,
to rent, own or lease factories, warehouses, storerooms, etc., and to do and
perform every act and thing necessary or convenient to properly conduct or carry
on its business.
<PAGE> 2
III
The place this corporation proposes to have its office and principal
place of business in the City of Portland, county of Multnomah and State of
Oregon.
IV
The amount of capital stock of this corporation shall be $35,000.
V
The amount of each share of capital stock shall be $10 and the number of
shares in this corporation shall be 3500.
IN WITNESS WHEREOF, we have hereunto set our hands and seals this 17th
day of September 1908, in triplicate.
Executed in the presence of: /s/ E. P. Armstrong
-----------------------------------
E. P. Armstrong
/s/ J. M. Crook
- ------------------------------- -----------------------------------
J. M. Crook
/s/ Clarence H. Gilbert
- ------------------------------- -----------------------------------
Clarence H. Gilbert
State of Oregon, )
ss.
County of Multnomah)
THIS CERTIFIES that on this 17th day of September 1908, before me the
undersigned, a Notary Public in and for said County and State, personally
appeared the within named E.P. Armstrong, J.M. Crook and Clarence H. Gilbert,
who are know to me to be the identical persons mentioned in and who executed the
foregoing Articles of Incorporation and acknowledged to me that they executed
the same.
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IN WITNESS WHEREOF, I have hereunto set my hand and Notarial Seal the
day and year first hereinabove written.
/s/
------------------------------------
Notary Public, State of Oregon
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CERTIFICATE AND COPY OF RESOLUTIONS increasing Capital Stock of Armstrong
Manufacturing Co., a Corporation.
I, Clarence H. Gilbert, secretary of Armstrong Manufacturing Co., a
corporation organized and formed under and by virtue of the laws of the State of
Oregon, hereby certify that at a meeting of the stockholders of said
corporation, duly and legally called and held at the principal office of said
corporation at 4th and Stark Streets in the city of Portland, County of
Multnomah, State of Oregon, at 2 o'clock P.M. on the 20th day of June, 1912, due
and legal notice having been given of such meeting, which meeting was called for
the purpose of increasing the capital stock of such corporation; that a majority
of the stock of said corporation was present at such meeting of the stockholders
thereof and voted; that the following is a full copy of the resolutions
authorizing the increase of capital stock of said corporation: Resolved that the
capital stock of this corporation be increased from $35,000 to $500,000; that
the president and secretary, or either of them, be authorized and directed to
take the necessary legal steps to carry this resolution into effect.
Such resolution was adopted by a vote of the majority of the stock of
such corporation.
WITNESS, my hand and the seal of said corporation affixed this _______
day of _____________, 19___.
-----------------------------------
, Secretary
{Corporate Seal}
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<PAGE> 5
STATE OF OREGON, )
SS.
COUNTY OF MULTNOMAH )
I, Clarence H. Gilbert, being first duly sworn, upon my oath depose and
say that I am secretary of Armstrong Manufacturing Co., a corporation; that the
foregoing statement is true, and that the resolution therein is a full and
complete copy of the resolution adopted at the meeting of the stockholders of
said corporation, held at its principal office at 4th and Stark Streets in the
City of Portland, State of Oregon, at 2 o'clock P.M., on the 20th day of June,
1912, which said meeting was called for the purposes of increasing the capital
stock of said corporation; that there was present, either in person or by proxy,
a majority of the stock of said corporation; and that said resolution increasing
the capital stock of Armstrong Manufacturing Co., a corporation from Thirty-Five
Thousand Dollars to Five Hundred Thousand Dollars was duly adopted by a vote of
the majority of the STOCK of such corporation.
/s/ Clarence H. Gilbert
---------------------------------
Clarence H. Gilbert
Subscribed and sworn to before me this 9th day of August, 1912.
---------------------------------
Notary Public for Oregon
[Notarial Seal]
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CERTIFICATE AND COPY OF RESOLUTIONS decreasing Capital Stock of Armstrong
Manufacturing Company, a Corporation.
I, Clarence H. Gilbert, secretary of Armstrong Manufacturing Company, a
corporation organized and formed under and by virtue of the laws of the State of
Oregon, hereby certify that at a meeting of the stockholders of said
corporation, duly and legally called and held at the principal office of said
corporation at Chamber of Commerce Street in the city of Portland, County of
Multnomah, State of Oregon, at 2 o'clock P.M., on the 25th day of July, 1913,
due and legal notice having been given of such meeting, which meeting was called
for the purpose of decreasing the capital stock of such corporation; that a
majority of the stock of said corporation was present at such meeting of the
stockholders thereof and voted; that the following is a full copy of the
resolutions authorizing the decrease of capital stock of said corporation:
"Resolved that the capital stock of this corporation be reduced from $500,000 to
$50,000, with 5000 shares, with Par Value of $10 each, and the President and
Secretary, or either of them, be authorized and directed to take the necessary
legal steps to carry this Resolution into effect:"
Such resolution was adopted by a vote of the majority of the stock of
such corporation.
WITNESS, my hand and the seal of said corporation affixed this 12th day
of August, 1913.
/s/ Clarence H. Gilbert
---------------------------------
Clarence H. Gilbert, Secretary
{Corporate Seal}
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<PAGE> 7
STATE OF OREGON, )
SS.
COUNTY OF MULTNOMAH )
I, Clarence H. Gilbert, being first duly sworn, upon my oath depose and
say that I am secretary of Armstrong Manufacturing Company, a corporation; that
the foregoing statement is true, and that the resolution therein is a full and
complete copy of the resolution adopted at the meeting of the stockholders of
said corporation, held at its principal office at Chamber of Commerce Street in
the City of Portland, State of Oregon, at 2 o'clock P.M., on the 25th day of
July, 1913, which said meeting was called for the purpose of decreasing the
capital stock of said corporation; that there was present, either in person or
by proxy, a majority of the stock of said corporation; and that said resolution
decreasing the capital stock of Armstrong Manufacturing Company, a corporation
from Five Hundred Thousand Dollars to Fifty Thousand Dollars was duly adopted by
a vote of the majority of the stock of such corporation.
/s/ Clarence H. Gilbert
---------------------------------
Clarence H. Gilbert
Subscribed and sworn to before me this 12th day of August, 1913.
/s/
---------------------------------
Notary Public for Oregon
[Notarial Seal]
-7-
<PAGE> 8
Supplementary Articles of Incorporation
OF
Armstrong Manufacturing Company
WHEREAS at a meeting of the stockholders of the above named corporation,
duly and regularly called and held, at 2 o'clock p.m. the 6th day of May 1930,
at office of the company No. 4--2d street in the City of Portland and State of
Oregon at which there were present and voting, either in person or by proxy,
stockholders owning twenty six hundred ninety (2690) shares of the capital stock
of said corporation, being more than three fourths of the stock issued and
outstanding, there was presented and adopted by a unanimous vote, a resolution
authorizing the directors of the said corporation to execute and file
supplementary articles, for the purpose of increasing the capital stock of the
corporation from $50,000 to $65,000, the increase of $15,000 to be preferred
stock entitled to 7 per cent cumulative annual dividends.
NOW, THEREFORE, We, E. P. Armstrong, L.E. Armstrong and F. H. Armstrong
being all of the directors of Armstrong Manufacturing Company, a corporation,
being thereto duly authorized by the resolution aforesaid, do hereby execute and
acknowledge supplementary articles of incorporation, amending Article IV and
Article V of the original articles of incorporation of this company, to read as
follows:
ARTICLE IV
The amount of the capital stock of this corporation shall be $65,000,
represented as follows: 5000 shares of common stock of the par value of $10.00
per share and entitled to one vote for each in all stockholders' meeting; 150
shares of preferred stock of the par value of $100 per share.
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<PAGE> 9
ARTICLE V
The preferred stock shall be entitled to 7 per cent. cumulative annual
dividends, shall have no voting privileges and all or any part thereof may be
called at any dividend period on payment of $102.00 per share.
IN WITNESS WHEREOF, we have hereunto set our hands and seals this 6th
day of May, A.D. 1930
Signed, sealed and delivered in the presence of /s/ E. P. Armstrong [SEAL]
-----------------------
E. P. Armstrong
/s/ F. M. Armstong [SEAL]
- ------------------------------------ -----------------------
F. M. Armstrong
/s/ Lloyd E. Armstong [SEAL]
- ------------------------------------ -----------------------
L. E. Armstrong
-9-
<PAGE> 10
STATE OF OREGON, )
SS.
COUNTY OF MULTNOMAH )
THIS CERTIFIES that on this 6th day of May, A.D. 1930, before me, the
undersigned, a Notary public in and for said county and state, personally
appeared E.P. Armstrong, F. M. Armstrong and L. E. Armstrong known to me to be
the identical persons named in and who executed the foregoing supplementary
articles of incorporation, and acknowledged to me that they executed the same
freely and voluntarily for the uses and purposes therein mentioned.
IN TESTIMONY WHEREOF, I have hereunto set my hand and notarial seal, the
day and year last above written.
/s/ W. S. U'Ren
-----------------------------------------
W. S. U'Ren
[NOTARIAL SEAL] My commission expires Sep. 29, 1931
-10-
<PAGE> 11
CERTIFICATE AND COPY OF RESOLUTION increasing CAPITAL STOCK OF Armstrong
Manufacturing Company, A CORPORATION
I, F. M. Armstrong, secretary of Armstrong Manufacturing Company by
virtue of the laws of the State of Oregon, hereby certify that at a meeting of
the stockholders of said corporation, duly and legally called and held at the
principal office of said corporation at No. 4--2d Street, in the City of
Portland, County of Multnomah, State of Oregon, at 2 o'clock p.m., on the 6th
day of May, 1960, due and legal notice having been given of such meeting, which
meeting was called for the purpose of increasing the capital stock of such
corporation; that a majority of the stock of said corporation was present at
such meeting of the stockholders thereof and voted; that the following is a full
copy of the resolution authorizing the increase of capital stock of said
corporation: "Resolved, that the capital stock of the Armstrong Manufacturing
Company be increased from $50,000 to $65,000, said increase to consist of 150
shares of preferred stock of the par value of $100 per share; the said preferred
stock to be entitled to 7 per cent. cumulative annual dividends and not entitled
to voting privileges; that the same or any part thereof be callable at any
dividend period at the price of $102 per share and the president and secretary
are hereby authorized to issue and sell said stock; that the board of directors
is hereby authorized to file supplementary articles of incorporation for said
increase of capital stock."
Such resolution was adopted by a vote of the majority of the stock of
such corporation, and more than 3/4 of said stock issued and outstanding.
WITNESS my hand and the seal of said corporation affixed this 6th day of
May, 1930.
[CORPORATE SEAL] /s/ F. M. Armstrong
-------------------------------
F. M. Armstrong, Secretary
STATE OF OREGON, )
SS.
COUNTY OF MULTNOMAH )
I, F. M. Armstrong, being first duly sworn, upon my oath depose and say
that I am secretary of the Armstrong Manufacturing Company, a corporation; that
the foregoing statement is true, and that the resolution therein is a full and
complete copy of the resolution adopted at the meeting of the stockholders of
said corporation, held at its principal office at No. 4--2d Street, in the
City of Portland, State of Oregon, at 2 o'clock P.M., on the 6th day of May
1930, which said meeting was called for the purpose of increasing the capital
stock of said corporation: that
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<PAGE> 12
there was present, either in person or by proxy, a majority of the stock of said
corporation; and that said resolution increasing the capital stock of the
Armstrong Manufacturing Company, a corporation, from Fifty Thousand Dollars to
Sixty Five Thousand Dollars was duly adopted by a vote of the majority of the
stock of such corporation and more than 3/4 of said stock issued and
outstanding.
/s/ F. M. Armstrong
------------------------------------
F. M. Armstrong
Subscribed and sworn to before me this 6th day of May, 1930.
[NOTARIAL SEAL] /s/ W. S. U'Ren
------------------------------------
Notary Public for Oregon
My commission expires Sept. 29, 1931
-12-
<PAGE> 13
STATEMENT OF
CANCELLATION OF REDEEMABLE SHARES
OF
ARMSTRONG MANUFACTURING COMPANY
To the Corporation Commissioner
of the State of Oregon:
Pursuant to the provisions of ORS 57.395 (Section 61, Chapter 549,
Oregon Laws 1953) of the Oregon Business Corporation Act, the undersigned
corporation submits the following statement of cancellation by redemption or
purchase of redeemable shares of the corporation:
FIRST: The name of the corporation is Armstrong Manufacturing
Company.
SECOND: The number of redeemable shares of the corporation canceled
through redemption or purchase is 93, itemized as follows:
Class Series Number of Shares
----- ------ ----------------
Preferred 93
THIRD: The aggregate number of issued shares of the corporation after
giving effect to such cancellation is 8,946, itemized as follows:
Class Series Number of Shares
----- ------ ----------------
Common 8946
FOURTH: The amount of the stated capital of the corporation after
giving effect to such cancellation is $39,460.
DATED: March 5, 1956
-------------
ARMSTRONG MANUFACTURING COMPANY
By /s/ Lloyd E. Armstrong
-------------------------------------
President
/s/ E. L. Briggs
-------------------------------------
Secretary
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<PAGE> 14
STATE OF OREGON, )
SS.
COUNTY OF MULTNOMAH )
I, Josephine L. Frederick, a notary public, do hereby certify that on
this 5th day of March, 1956, personally appeared before me Lloyd E. Armstrong,
who declared he is President of the corporation executing the foregoing
document, and being first duly sworn, acknowledged that he signed the foregoing
document in the capacity therein set forth and declared that the statements
therein contained are true.
IN WITNESS WHEREOF, I have hereunto set my hand and seal, the day and
year before written.
/s/ Josephine L. Frederick
--------------------------------------
Notary Public for Oregon
My commission expires:
My Commission Expires Feb. 24, 1960
-14-
<PAGE> 15
No. O. Required by ORS 57,065 (Section 11, Chapter 549, Oregon Laws 1953).
Mail to Corporation Commissioner, Salem, Oregon. There is no fee. Any
corporation failing to file this document is subject to involuntary
dissolution.
DESIGNATION OF INITIAL REGISTERED OFFICE AND REGISTERED AGENT
ARMSTRONG MANUFACTURING COMPANY, a corporation organized and existing under the
laws of the State of Oregon, hereby certifies that, pursuant to a duly adopted
resolution of its board of directors, the address of the registered office of
the corporation in the State of Oregon shall be 2135 N.W. 21st Avenue, Portland
that the registered agent of the corporation shall be Lloyd E. Armstrong; and
that the address of its registered office and the address of the business office
of its registered agent are identical.
IN WITNESS WHEREOF, the undersigned corporation has caused this
certificate to be executed in its name by its President or Secretary, this 20th
day of January, 1954.
ARMSTRONG MANUFACTURING COMPANY
-------------------------------
[Name of corporation]
By /s/ Lloyd E. Armstrong
----------------------------
President
STATE OF OREGON, )
SS.
COUNTY OF MULTNOMAH )
I, Josephine L. Frederick, a Notary Public, do hereby certify that on
the 20th day of January, A.D. 1954, personally appeared before me Lloyd E.
Armstrong, who declared he is President of the corporation executing the
foregoing document, and being first duly sworn acknowledged that he signed the
foregoing document in the capacity therein set forth and declared that the
statements therein contained are true.
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<PAGE> 16
IN WITNESS WHEREOF, I have hereunto set my hand and seal, the day and
year before written.
/s/ Josephine L. Frederick
----------------------------------------
Notary Public for STATE OF OREGON
My Commission Expires Feb. 24, 1956
-16-
<PAGE> 17
STATEMENT OF
CANCELLATION OF REACQUIRED SHARES
OF
ARMSTRONG MANUFACTURING COMPANY
Pursuant to the provisions of ORS 57.400 of the Oregon Business
Corporation Act, the undersigned corporation submits the following statement of
cancellation of reacquired shares:
FIRST: The name of the corporation is Armstrong Manufacturing
Company.
SECOND: The number of reacquired shares canceled by resolution duly
adopted by the board of directors of the corporation on February 1, 1966, is 22,
itemized as follows:
Class Series Number of Shares
----- ------ ----------------
$10 par value common 22
THIRD: The aggregate number of issued shares of the corporation after
giving effect to such cancellation is 3,924, itemized as follows:
Class Series Number of Shares
----- ------ ----------------
$10 par value common 3,924
FOURTH: The amount of the stated capital of the corporation after
giving effect to such cancellation is $39,240.
DATED: February 1, 1966
----------------
ARMSTRONG MANUFACTURING COMPANY
By /s/ T. C. Andrianoff
----------------------------------
President
/s/ J. L. Frederick
----------------------------------
Secretary
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<PAGE> 18
STATE OF OREGON, )
SS.
COUNTY OF MULTNOMAH )
I, Arliss King, a notary public, do hereby certify that on this 1st day
of February, 1966, personally appeared before me T. C. Andrianoff, who being by
me first duly sworn, declared that he is the President of Armstrong
Manufacturing Company, who signed the foregoing document as such officer of said
corporation, and that the statements therein contained are true.
IN WITNESS WHEREOF, I have hereunto set my hand and seal, the day and
year before written.
/s/ Arliss King
-----------------------------------------
Notary Public for Oregon
My commission expires:
My Commission Expires April 15, 1963
-18-
<PAGE> 19
ARTICLES OF MERGER
OF
ARMSTRONG MERGER CO.
INTO
ARMSTRONG MANUFACTURING COMPANY
Pursuant to ORS 57.470, Armstrong Merger Co., an Oregon corporation
(hereinafter "AMC"), and Armstrong Manufacturing Company, an Oregon corporation
(hereinafter "Armstrong"), adopt the following Articles of Merger for the
purpose of merging AMC into Armstrong.
FIRST: The plan of merger is the restated plan of merger dated as of
February 12, 1983, between Armstrong and AMC which is attached hereto and made a
part hereof.
SECOND: Armstrong has outstanding 2,316 shares of common stock entitled
to vote upon the plan of merger as a single class. AMC has outstanding 2,156
shares of common stock entitled to vote upon the plan of merger as a single
class.
THIRD: At a meeting of the shareholders of Armstrong on March 8, 1983,
held in accordance with the laws of the State of Oregon, the number of shares of
common stock voted for the plan of merger was 2,291 and against the plan of
merger was 0. At a meeting of the shareholders of AMC on March 8, 1983, held in
accordance with the laws of the State of Oregon, the number of shares of common
stock voted for the plan of merger was 2,156 and against the plan of merger was
0.
We, the undersigned officers of Armstrong Merger Co. and Armstrong
Manufacturing Company, declare under penalties of perjury that we have examined
the foregoing and to the best of our knowledge and belief it is true, correct
and complete.
-19-
<PAGE> 20
Dated this 8th day of March, 1983.
ARMSTRONG MERGER CO.
By /s/ Frederic B. Andrianoff
--------------------------------
Fredric B. Andrianoff
President and Secretary
ARMSTRONG MANUFACTURING COMPANY
By /s/ F. B. Andrianoff
--------------------------------
F. B. Andrianoff
President
By /s/ Arliss King
--------------------------------
Arliss King
Secretary
-20-
<PAGE> 21
RESTATED PLAN OF MERGER
This Restated Plan of Merger ("Plan"), dated as of February 12, 1983,
between Armstrong Manufacturing Company ("Armstrong") and Armstrong Merger Co.
("AMC"), said corporations being herein sometimes individually called
"Constituent Corporation" and sometimes collectively called "Constituent
Corporation";
W I T N E S S E T H :
WHEREAS Armstrong and AMC are corporations organized and existing under
the laws of the State of Oregon; and
WHEREAS the respective boards of directors of Armstrong and AMC deem it
desirable and in the best interests of their respective corporations that AMC be
merged with and into Armstrong pursuant to the provisions of the Oregon Business
Corporation Act upon the terms and conditions hereinafter se forth,
NOW, THEREFORE, it is agreed as follows:
ARTICLE I
Merger
1.01 Armstrong and AMC shall be merged as of the Effective Date (as
defined in section 1.03 hereof) into a single surviving corporation (herein
sometimes called the "Surviving Corporation"), which shall be Armstrong, one of
the Constituent Corporations, which shall continue its corporate existence and
remain an Oregon corporation, all on the terms and conditions herein set forth.
1.02 Prior to the Effective Date, and as a condition to the respective
obligations of the Constituent Corporations, this Plan shall be approved by the
shareholders of each of the Constituent Corporations as required by ORS 57.465.
1.03 The merger of AMC into Armstrong shall become effective upon the
filing of articles of merger and issuance of a certificate of merger pursuant to
ORS 57.470 and 57.475. The date and time of such filing and issuance is herein
called the "Effective Date."
ARTICLE II
Name and Continued Corporate Existence
of Surviving Corporation
2.01 The corporate name of Armstrong (i.e., "Armstrong Manufacturing
Company"), a Constituent Corporation, whose corporate existence is to survive
this merger and continue thereafter as the Surviving Corporation and its
identity, existence, purposes, powers, objects, franchises, rights and
immunities shall continue unaffected and unimpaired by the merger, and
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<PAGE> 22
the corporate identity, existence, purpose, powers, objects, franchises, rights
and immunities of AMC shall be wholly merged into Armstrong, and Armstrong shall
be fully vested therewith. On the Effective Date the separate existence of AMC,
except insofar as continued by law, shall cease.
ARTICLE III
Governing Law
3.01 The laws of the State of Oregon shall govern the Surviving
Corporation. The Surviving Corporation shall have all the rights, privileges,
immunities and powers and shall be subject to all the duties and liabilities of
a corporation organized under the Oregon Business corporation Act.
ARTICLE IV
Articles of Incorporation and Bylaws
of Surviving Corporation
4.01 The articles of incorporation of Armstrong as in effect immediately
prior to the Effective Date shall be the articles of incorporation of the
Surviving Corporation until they shall thereafter by duly altered, amended or
repealed.
4.02 The bylaws of Armstrong as in effect immediately prior to the
Effective Date shall be the bylaws of the Surviving Corporation until they shall
thereafter by duly altered, amended or repealed.
ARTICLE V
Directors and Officers
5.01 The directors of Armstrong immediately prior to the Effective Date
shall be the directors of the Surviving Corporation who shall continue in office
as provided in the bylaws of the Surviving Corporation.
5.02 The officers of Armstrong immediately prior to the Effective Date
shall be the officers of the Surviving Corporation who shall hold office as
provided in the bylaws of the Surviving Corporation.
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<PAGE> 23
ARTICLE VI
Capital Stock of the Surviving Corporation
6.01 The authorized capital stock of the Surviving Corporation on the
Effective Date shall be as set forth in the articles of incorporation of the
Surviving Corporation.
ARTICLE VII
Conversion of Securities on Merger
7.01 The manner and basis of converting the shares of the Constituent
Corporations into shares of the Surviving Corporation shall be as set forth in
this Article VII.
7.02 Each share of common stock, $10 par value, of Armstrong ("Armstrong
Common Stock") outstanding immediately prior to the Effective Date, shall be
canceled and shall not be converted into shares or other securities of the
Surviving Corporation. The holders of such shares of Armstrong Common Stock,
other than AMC, shall be paid $1,600 in cash for each such share upon surrender
of the certificates representing such shares and shall have no ownership
interest in the Surviving Corporation. No interest shall accrue with respect to
sums payable to such holders. No payment shall be made to AMC with respect to
the shares of Armstrong Common Stock held by it immediately prior to the
Effective Date.
7.03 Each share of common stock, $1 par value, of AMC issued and
outstanding immediately prior to the Effective Date shall be converted into one
share of common stock, $10 par value, of the Surviving Corporation.
7.04 Each share of Armstrong Common Stock which is issued but not
outstanding immediately prior to the Effective Date shall be canceled.
ARTICLE VIII
Assets and Liabilities
8.01 On the Effective Date, the Surviving Corporation shall thereupon
and thereafter possess all the rights, privileges, immunities and franchises, as
well of a public as of a private nature of each of the Constituent Corporations;
and all property, real, personal and mixed, all debts due to either of the
Constituent Corporations on whatever account, including subscriptions to shares
and all other choses in action, and all and every other interest of or belonging
to or due to each of the Constituent Corporations shall be taken and deemed to
be transferred to and vested in the Surviving Corporation without further act or
deed; and the title to any real estate or any interest therein vested in either
of the Constituent Corporations shall not revert or be in any way impaired by
reason of the merger; and the Surviving Corporation shall thenceforth be
responsible and liable for all the liabilities and obligations of each of the
Constituent Corporations; and any claim existing or action or proceeding pending
by or against either of the Constituent
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<PAGE> 24
Corporations may be prosecuted as if the merger had not taken place, or the
Surviving Corporation may be substituted in place of either of the Constituent
Corporations; provided, however, that neither the rights of creditors nor any
liens upon the property of either of the Constituent Corporations shall be
impaired by the merger.
ARTICLE IX
Termination
9.01 This Plan shall automatically terminate at the close of business on
June 30, 1983, if the merger provided for herein shall not have been previously
consummated, unless such date is extended by the boards of directors of the
Constituent Corporations.
9.02 With the approval of the boards of directors of both of the
Constituent Corporations, this Plan may be abandoned by the Constituent
Corporations prior to the Effective Date without liability of either party to
the other party.
9.03 In the event of termination of this Plan pursuant to this Article
IX, (i) this Plan shall become wholly void and of no effect, (ii) each of the
parties shall pay all expenses incurred by such party in connection herewith,
and (iii) there shall be no obligation or liability on the part of either party
to the other.
9.04 Neither Constituent Corporation shall be obligated to consummate
the merger if an order of any court shall have been entered or if there shall
have been instituted or threatened before any court or governmental agency or
body any action or proceeding to restrain or prohibit the merger.
ARTICLE X
Power of Surviving Corporation to Amend
Articles of Incorporation
10.01 The Surviving Corporation reserves the right to amend, alter,
change or repeal its articles of incorporation in the manner now or hereafter
prescribed by statute or otherwise authorized by law and all rights and powers
conferred in the articles of incorporation on shareholders, directors or
officers of the Surviving Corporation or any person whomsoever are subject to
this power.
ARTICLE XI
Amendment of Plan
11.01 With the approval of the boards of directors of both of the
constituent Corporations, this Plan may be amended at any time; provided that
such amendment shall not change the number of shares of common stock of the
Surviving Corporation issuable hereunder,
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<PAGE> 25
or change the amount payable with respect to shares of Armstrong Common Stock
outstanding immediately prior to the Effective Date, unless such amendment shall
have been approved and adopted by the affirmative vote of a majority of the
outstanding shares of each of the Constituent Corporations.
ARTICLE XII
Miscellaneous
12.01 The captions of the articles hereof are for convenience only and
shall not control or affect the meaning or construction of any of the provisions
of this Plan.
12.02 For the convenience of the parties and to facilitate the filing or
recording of this Plan, any number of counterparts hereof may be executed and
each such executed counterpart shall be deemed to be an original instrument.
IN WITNESS WHEREOF, this Plan has been duly executed by the parties
hereto as of the date first above written.
ARMSTRONG MANUFACTURING COMPANY ARMSTRONG MERGER CO.
By F. B. Andrianoff By F. B. Andrianoff
------------------------------- -----------------------------------
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<PAGE> 1
EXHIBIT 3.4
BYLAWS OF ARMSTRONG MANUFACTURING COMPANY
ARTICLE I. OFFICES
The principal office of the corporation in the state of Oregon shall be
located in the city of Portland, county of Multnomah. The corporation may have
such other offices, either within or without the state of Oregon, as the board
of directors may designate or as the business of the corporation may require
from time to time.
The registered office of the corporation required by the Oregon Business
Corporation Act to be maintained in the state of Oregon may be, but need not be,
identical with the principal office in the state of Oregon, and the address of
the registered office may be changed from time to time by the board of
directors.
ARTICLE II. SHAREHOLDERS
Section 1. ANNUAL MEETING The annual meeting of the shareholders shall
be held on a business day in February in each year, after providing a minimum
thirty days notice to all stockholders of both time and date of meeting.
Section 2. SPECIAL MEETING Special meetings of the shareholders, for any
purpose or purposes, unless otherwise prescribed by statute, may be called by
the president or by the board of directors, and shall be called by the president
at the request of the holders of not less than one tenth of all the outstanding
shares of the corporation entitled to vote at the meeting.
Section 3. PLACE OF MEETING The board of directors may designate any
place, either within or without the state of Oregon, as the place of meeting for
any annual meeting or for any special meeting called by the board of directors.
A waiver of notice signed by all shareholders entitled to vote at a meeting may
designate any place, either within or without the state of Oregon, as the place
for the holding of such meeting. If no designation is made, or if a special
meeting be otherwise called, the place of meeting shall be the registered office
of the corporation in the state of Oregon.
Section 4. NOTICE OF MEETING Written or printed notice stating the
place, day and hour of the meeting and, in case of a special meeting, the
purpose or purposes for which the meeting is called, shall be delivered not less
than ten nor more than fifty days before the date of the meeting, either
personally or by mail, by or at the direction of the president, or the
secretary, or the officer or persons calling the meeting, to each shareholder of
record entitled to vote at such meeting. If mailed, such notice shall be deemed
to be delivered when deposited in the United States mail, addressed to the
shareholder at his address as it appears on the stock transfer books of the
corporation, with postage thereon prepaid.
<PAGE> 2
Section 5. QUORUM A majority of the outstanding shares of the
corporation entitled to a vote, represented in person or by proxy, shall
constitute a quorum at a meeting of shareholders. If less than a majority of the
outstanding shares are represented at a meeting, a majority of the shares so
represented may adjourn the meeting from time to time without further notice. At
such adjourned meeting at which a quorum shall be present or represented, any
business may be transacted which might have been transacted at the meeting as
originally noticed. The shareholders present at a duly organized meeting may
continue to transact business until adjournment, notwithstanding the withdrawal
of enough shareholders to leave less than a quorum.
Section 6. PROXIES At all meetings of shareholders, a shareholder may
vote by proxy executed in writing by the shareholder or by his duly authorized
attorney in fact. Such proxy shall be filed with the secretary of the
corporation before or at the time of the meeting. No proxy shall be valid after
eleven months from the date of its execution, unless otherwise provided in the
proxy.
Section 7. VOTING OF SHARES Each outstanding share of the corporation's
common stock shall be entitled to one vote upon each matter submitted to a vote
at a meeting of the shareholders. The preferred shares shall not be entitled to
vote, except that each outstanding preferred share shall be entitled to one vote
upon each matter upon which class voting is required by law.
Section 8. VOTING OF SHARES BY CERTAIN HOLDERS Shares standing in the
name of another corporation may be voted by such officer, agent or proxy as the
bylaws of such corporation may prescribe, or, in the absence of such provision,
as the board of directors of such corporation may determine.
Shares held by an administrator, executor, guardian or conservator may
be voted by him, either in person or by proxy, without a transfer of such shares
into his name. Shares standing in the name of a trustee may be voted by him,
either in person or by proxy, but no trustee shall be entitled to vote shares
held by him without a transfer of such shares into his name.
Shares standing in the name of a receiver may be voted by such receiver,
and shares held by or under the control of a receiver may be voted by such
receiver without the transfer thereof into his name if authority so to do be
contained in an appropriate order of the court by which such receiver was
appointed.
A shareholder whose shares are pledged shall be entitled to vote such
shares until the shares have been transferred into the name of the pledgee, and
thereafter the pledgee shall be entitled to vote the shares so transferred.
Shares of its own stock belonging to the corporation or held for its
benefit by another corporation in a fiduciary capacity or held by a corporation
in which the corporation holds a majority of the voting shares shall not be
voted at any meeting or counted in determining the total number of outstanding
shares at any given time.
-2-
<PAGE> 3
Section 9. INFORMAL ACTION BY SHAREHOLDERS. Any action required to be
taken at a meeting of the shareholders, or any other action which may be taken
at a meeting of the shareholders, may be taken without a meeting if a consent in
writing, setting forth the action so taken, shall be signed by all the
shareholders entitled to vote with respect to the subject matter thereof.
ARTICLE III. BOARD OF DIRECTORS
Section 1. GENERAL POWERS. The business and affairs of the corporation
shall be managed by its board of directors.
Section 2. NUMBER, TENURE AND QUALIFICATIONS. The number of directors of
the corporation shall be between five and nine. Each director shall hold office
until the next annual meeting of the shareholders and until his successor shall
have been elected and qualified. In the event of the resignation or termination
of any board member, the shareholders may approve the resignation/termination
prior to the next annual meeting without electing an immediate successor.
Directors need not be residents of the state of Oregon or shareholders of the
corporation.
Section 3. REGULAR MEETINGS. A regular meeting of the board of directors
shall be held without other notice than this bylaw immediately after, and at the
same place as, the annual meeting of shareholders. The board of directors may
provide by resolution the time and place, either within or without the state of
Oregon, for the holding of additional regular meetings without other notice than
such resolution.
Section 4. SPECIAL MEETINGS. Special meetings of the board of directors
may be called by or at the request of the president or any two directors. The
person or persons authorized to call special meetings of the board of directors
may fix any place, either within or without the state of Oregon, as the place
for holding any special meeting of the board of directors called by them.
Section 5. NOTICE. Notice of any special meeting shall be given at least
five days previously thereto by written notice delivered personally or mailed to
each director at his business address, or by telegram. If mailed, such notice
shall be deemed to be delivered when deposited in the United States mail so
addressed, with postage thereon prepaid. If notice be given by telegram, such
notice shall be deemed to be delivered when the telegram is delivered to the
telegraph company. Any director may waive notice of any meeting. The attendance
of a director at a meeting shall constitute a waiver of notice of such meeting,
except where a director attends a meeting for the express purpose of objecting
to the transaction of any business because the meeting is not lawfully called or
convened. Neither the business to be transacted at, nor the purpose of, any
regular or special meeting of the board of directors need be specified in the
notice or wavier of notice of such meeting.
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Section 6. QUORUM. A majority of the number of directors fixed by
Section 2 of this Article III shall constitute a quorum for the transaction of
business at any meeting of the board of directors, but, if less than such
majority is present at a meeting, a majority of the directors present may
adjourn the meeting from time to time without further notice.
Section 7. MANNER OF ACTION. The act of the majority of the directors
present at a meeting at which a quorum is present shall be the act of the board
of directors.
Section 8. VACANCIES. Any vacancy occurring in the board of directors
may be filled by the affirmative vote of a majority of the remaining directors
though less than a quorum of the board of directors. A director elected to fill
a vacancy shall be elected for the unexpired term of his predecessor in office.
Any directorship to be filled by reason of an increase in the number of
directors shall be filled by election at an annual meeting or at a special
meeting of shareholders called for that purpose.
Section 9. PRESUMPTION OF ASSENT. A director of the corporation who is
present at a meeting of the board of directors at which action on any corporate
matter is taken shall be presumed to have assented to the action taken, unless
his dissent shall be entered in the minutes of the meeting, or unless he shall
file his written dissent to such action with the person acting as the secretary
of the meeting before the adjournment thereof, or shall forward such dissent by
registered mail to the secretary of the corporation immediately after the
adjournment of the meeting. Such right to dissent shall not apply to a director
who voted in favor of such action.
ARTICLE IV. OFFICERS
Section 1. NUMBER. The officers of the corporation shall be a chairman
of the board of directors, a president, one or more vice-presidents (the number
thereof to be determined by the board of directors), a secretary and a
treasurer, each of whom shall be elected by the board of directors. Such other
officers and assistant officers as may be deemed necessary may be elected or
appointed by the board of directors. Any two or more offices may be held by the
same person, except the offices of president and secretary.
Section 2. ELECTION AND TERM OF OFFICE. The officers of the corporation
to be elected by the board of directors shall be elected annually by the board
of directors at the first meeting of the board of directors held after each
annual meeting of the shareholders. If the election of officers shall not be
held at such meeting, such election shall be held as soon thereafter as
conveniently may be. Each officer shall hold office until his successor shall
have been duly elected and shall have qualified or until his death or until he
shall resign or shall have been removed in the manner hereinafter provided.
Section 3. REMOVAL. Any officer or agent elected or appointed by the
board of directors may be removed by the board of directors whenever in its
judgment the best interests of the corporation would be served thereby, but such
removal shall be without prejudice to the contract rights, if any, of the person
so removed.
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Section 4. VACANCIES. A vacancy in any office because of death,
resignation, removal, disqualification, or otherwise, may be filled by the board
of directors for the
unexpired portion of the term.
Section 5. CHAIRMAN OF THE BOARD OF DIRECTORS. The chairman of the board
of directors shall, when present, preside at all meetings of the shareholders
and of the board of directors and shall perform all duties incident to such
office and such other duties as may be prescribed by the board of directors from
time to time.
Section 6. PRESIDENT. The president shall be the principal executive
officer of the corporation and, subject to the control of the board of
directors, shall in general supervise and control all the business and affairs
of the corporation. He shall, in the absence of the chairman of the board of
directors, preside at all meetings of the shareholders and of the board of
directors. He may sign, with the secretary or any other proper officer of the
corporation thereunto authorized by the board of directors, certificates for
shares of the corporation, and any deeds, mortgages, bonds, contracts or other
instruments which the board of directors has authorized to be executed, except
in cases where the signing and execution thereof shall be expressly delegated by
the board of directors or by these bylaws to some other officer or agent of the
corporation or shall be required by law to be otherwise signed or executed; and
in general he shall perform all duties incident to the office of president and
such other duties as may be prescribed by the board of directors from time to
time.
Section 7. VICE-PRESIDENTS. In the absence of the president, or in the
event of his death, inability or refusal to act, the vice-president (or, in the
event there may be more than one vice-president, the vice-presidents in the
order designated at the time of their election, or, in the absence of any
designation, then in the order of their election) shall perform the duties of
the president, and, when so acting, shall have all the powers of and be subject
to all the restrictions upon the president. Any vice-president may sign, with
the secretary or an assistant secretary, certificates for shares of the
corporation; and shall perform such other duties as from time to time be
assigned to him by the president or the board of directors.
Section 8. SECRETARY. The secretary shall: (a) keep the minutes of the
shareholders' and of the board of director's meetings in one or more books
provided for that purpose; (b) see that all notices are duly given in accordance
with the provisions of these bylaws or as required by law; (c) be custodian of
the corporate records and of the seal of the corporation and see that the seal
of the corporation is affixed to all documents, the execution of which on behalf
of the corporation under its seal is duly authorized; (d) keep a register of the
post office address of each shareholder which shall be furnished to the
secretary by such shareholder; (e) sign with the president, or a vice-president,
certificates for shares of the corporation, the issuance of which shall have
been authorized by resolution of the board of directors; (f) have general charge
of the stock transfer books of the corporation; and (g) in general perform all
duties incident to the office of the secretary and such other duties as from
time to time may be assigned to him by the president or by the board of
directors.
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Section 9. TREASURER. If required by the board of directors, the
treasurer shall give a bond for the faithful discharge of his duties in such sum
and with such surety or sureties as the board of directors shall determine. He
shall: (a) have charge and custody of and be responsible for all funds and
securities of the corporation; receive and give receipts for moneys due and
payable to the corporation from any source whatsoever, and deposit all such
moneys in the name of the corporation in such banks, trust companies or other
depositories as shall be selected in accordance with the provisions of Article V
of these bylaws; and (b) in general perform all the duties incident to the
office of treasurer and such other duties as from time to time may be assigned
to him by the president or by the board of directors.
Section 10. ASSISTANT SECRETARIES AND ASSISTANT TREASURERS. The
assistant secretaries, when authorized by the board of directors, may sign with
the president or a vice-president certificates for shares of the corporation,
the issuance of which shall have been authorized by a resolution of the board of
directors. The assistant treasurers shall respectively, if required by the board
of directors, give bonds for the faithful discharge of their duties in such sums
and with such sureties as the board of directors shall determine. The assistant
secretaries and assistant treasurers, in general, shall perform such duties as
shall be assigned to them by the secretary or the treasurer, respectively, or by
the president or the board of directors.
Section 11. SALARIES. The salaries of the officers shall be fixed from
time to time by the board of directors and no officer shall be prevented from
receiving such salary by reason of the fact that he is also a director of the
corporation.
ARTICLE V. CONTRACT, LOANS, CHECKS AND DEPOSITS
Section 1. CONTRACTS. The board of directors may authorize any officer
or officers, agent or agents, to enter into any contract or execute and deliver
any instrument in the name of and on behalf of the corporation, and such
authority may be general or confined to specific instances.
Section 2. LOANS. No loans shall be contracted on behalf of the
corporation and no evidence of indebtedness shall be issued in its name unless
authorized by a resolution of the board of directors. Such authority may be
general or confined to specific instances.
Section 3. CHECKS, DRAFTS, ETC. All checks, drafts and other orders for
the payment of money, notes or other evidences of indebtedness issued in the
name of the corporation shall be signed by such officer or officers, agent or
agents of the corporation and in such manner as shall from time to time be
determined by resolution of the board of directors.
Section 4. DEPOSITS. All funds of the corporation not otherwise employed
shall be deposited from time to time to the credit of the corporation in such
banks, trust companies or other depositories as the board of directors may
select.
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ARTICLE VI. CERTIFICATES FOR SHARES AND THEIR TRANSFER
Section 1. CERTIFICATES FOR SHARE. Certificates representing shares of
the corporation shall be in such form as shall be determined by the board of
directors. Such certificates shall be signed by the president or a
vice-president and by the secretary or an assistant secretary or facsimile
signatures of said officers shall be affixed to such certificates. All
certificates for shares shall be consecutively numbered or otherwise identified.
The name and address of the person to whom the shares represented thereby are
issued, with the number of shares and date of issue, shall be entered on the
stock transfer books of the corporation. All certificates surrendered to the
corporation for transfer shall be cancelled and no new certificate shall be
issued until the former certificate for a like number of shares shall have been
surrendered and cancelled, except that in case of a lost, destroyed or mutilated
certificate a new one may be issued therefor on such terms and indemnity to the
corporation as the board of directors may prescribe.
Section 2. TRANSFER OF SHARES. Transfer of shares of the corporation
shall be made only on the stock transfer books of the corporation by the holder
of record thereof or by his legal representative, who shall furnish proper
evidence of authority to transfer, or by his attorney thereunto authorized by
power of attorney duly executed and filed with the secretary of the corporation,
and on surrender for cancellation of the certificate for such shares. The person
in whose name shares stand on the books of the corporation shall be deemed by
the corporation to be the owner thereof for all purposes.
ARTICLE VII. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Each director and officer of the corporation now or hereafter in office
and his heirs, executors and administrators, and each director and officer of
the corporation and his heirs, executors and administrators who now acts, or
shall hereafter act at the request of the corporation as director or officer of
another company controlled by the corporation, shall be indemnified by the
corporation against all costs, expenses and amounts or liability therefor,
including counsel fees, reasonably incurred by or imposed upon him in connection
with or resulting from any action, suit, proceeding or claim to which he may be
made a party, or in which he may be or become involved by reason of his acts of
omission or commission, or alleged acts of commission as such director or
officer, or subject to the provisions hereof, any settlement thereof, whether or
not he continues to be such director or officer at the time of incurring such
costs, expenses or amounts, and whether or not the action or omission to act on
the part of such director or officer, which is the basis of such suit, action,
proceeding or claim, occurred before or after the adoption of this bylaw,
provided that such indemnification shall not apply with respect to any matter as
to which such director or officer shall be finally adjudged in such action, suit
or proceeding to have been individually guilty of willful misfeasance or
malfeasance in the performance of his duty as such director or officer, and
provided, further, that the indemnification herein provided shall, with respect
to any settlement of any such suit,
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action, proceeding or claim, include reimbursement of any amounts paid and
expenses reasonably incurred in settling any such suit, action, proceeding or
claim, when, in the judgment of the board of directors of the corporation, such
settlement and reimbursement appear to be for the best interests of the
corporation. The foregoing right of indemnification shall be in addition to and
not exclusive of any and all other rights as to which any such director or
officer may be entitled under any bylaw, agreement, vote of shareholders or
otherwise.
ARTICLE VIII. SEAL
The seal, the impression of which appears in the margin opposite this
article, is hereby adopted as the official seal of the corporation.
ARTICLE IX. AMENDMENTS
These bylaws may be altered, amended or repealed and new bylaws may be
adopted by the board of directors at any regular or special meeting of the board
of directors.
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EXHIBIT 3.5
CERTIFICATE OF INCORPORATION
OF
SIMONDS HOLDING COMPANY INC.
The undersigned, in order to form a corporation under and pursuant to
the provisions of the General Corporation Law of the State of Delaware, does
hereby certify as follows:
FIRST: The name of the corporation is:
Simonds Holding Company Inc.
SECOND: The registered office of the corporation in the State of
Delaware is located at 1209 Orange Street, in the City of Wilmington, County of
New Castle. The name and address of its registered agent at such address is The
Corporation Trust Company.
THIRD: The nature of the business to be conducted or promoted and the
purposes of the corporation are to engage in any lawful act or activity for
which corporations may be organized under the General Corporation Law of
Delaware.
FOURTH: The total number of shares of stock which the corporation shall
have the authority to issue is one hundred (100) shares of Common Stock, at $.01
par value.
The following restrictions are imposed upon the transfer of shares of
the Common Stock of the corporation:
The corporation shall have the right to purchase, or to direct the
transfer of, the shares of its Common Stock in the events and subject to the
conditions and at a price fixed as provided below; each holder or shares of such
Common Stock holds his shares subject to this right and by accepting the same
upon original issue or subsequent transfer thereof, the stockholder agrees for
himself, his legal representatives and assigns as follows:
<PAGE> 2
In the event of any change in the ownership of any share or shares of
such Common Stock (made or proposed) or in the right to vote thereon (whether by
the holder's act or by death, legal disability, operation of law, legal
processes, order of court, or otherwise, except by ordinary proxies or powers of
attorney) the corporation has the right to purchase such share or all or any
part of such shares or to require the same to be sold to a purchaser or
purchasers designated by the corporation or to follow each such method in part
at a price per share equal to the fair value thereof at the close of business on
the last business day next preceding such event as determined by mutual
agreement or, failing such agreement, by arbitration as provided below.
In any such event the owner of the share or shares concerned therein
(being for the purposes of these provisions, all persons having any property
interest therein) shall give notice thereof in detail satisfactory to the
corporation. Within ten days after receipt of said owner's notice, the
corporation shall elect whether or not to exercise its said rights in respect to
said shares and, if it elects to exercise them, shall give notice of its
election.
Failing agreement between the owner and the corporation as to the price
per share to be paid, such price shall be the fair value of such shares as
determined by three arbitrators, one designated within five days after the
termination of said ten-day period by the registered holder of said share or
shares or his legal representatives, one within said period of five days by the
corporation and the third within five days after said appointment last occurring
by the two so chosen. Successor arbitrators, if any shall be required shall be
appointed, within reasonable time, as nearly as may be in the manner provided as
to the related original appointment. No appointment shall be deemed as having
been accomplished unless such arbitrator shall have accepted in writing his
appointment as such within the time limited for his appointment. Notice of each
appointment of an arbitrator shall be given promptly to the other parties in
interest. Said
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arbitrators shall proceed promptly to determine said fair value. The
determination of the fair value of said share or shares by agreement of any two
of the arbitrators shall be conclusive upon all parties interest in such shares.
Forthwith upon such determination the arbitrators shall mail or deliver notice
of such determination to the owner (as above defined) and to the corporation.
Within ten days after agreement upon said price or mailing of notice of
determination of said price by arbitrators as provided below (whichever shall
last occur), the shares specified therein for purchase shall be transferred to
the corporation or to the purchaser or purchasers designated therein or in part
to each as indicated in such notice of election against payment of said price at
the principal office of the corporation.
If in any of the said events, notice therefor having been given as
provided above, the corporation elects in respect of any such shares or any part
thereof not to exercise its said rights, or fails to exercise them or to give
notice or make payment all as provided above, or waives said rights by vote or
in authorized writing, then such contemplated transfer or such change may become
effective as to those shares with respect to which the corporation elects not to
exercise its rights or fails to exercise them or to give notice or to make
payment, if consummated within thirty days after such election, failure or
waiver by the corporation, or within such longer period as the corporation may
authorize.
If the owner's notice in respect of any of such shares of Common Stock
is not received by the corporation as provided above, or if the owner fails to
comply with these provisions in respect of any such shares in any other regard,
the corporation, at its option and in addition to its other remedies, may
suspend the rights to vote or to receive dividends on said shares, or may refuse
to register on its books any transfer of said shares or otherwise to recognize
any transfer or change in the ownership thereof or in the right to vote thereon,
one or more, until these
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<PAGE> 4
provisions are complied with to the satisfaction of the corporation; and if the
required owner's notice is not received by the corporation after written demand
by the corporation it may also or independently proceed as though a proper
owner's notice had been received at the expiration of ten days after mailing
such demand, and, if it exercises its rights with respect to said shares or any
of them, the shares specified shall be transferred accordingly.
In respect of these provisions with respect to the transfer of shares of
Common Stock, the corporation may act by its board of directors. Any notice or
demand under said provisions shall be deemed to have been sufficiently given if
in writing delivered by hand or addressed by mail postpaid, to the corporation
at its principal office or to the owner (as above defined) or to the holder
registered on the books of the corporation (or his legal representative) of the
share or shares in question at the address stated in his notice or at his
address appearing on the books of the corporation.
Nothing herein contained shall prevent the pledging of shares, if there
is neither a transfer of the legal title thereto nor a transfer on the books of
the corporation into the name of the pledgee, but no pledgee or person claiming
thereunder shall be entitled to make or cause to be made any transfer of pledged
shares by sale thereof or otherwise (including in this prohibition transfer on
the books of the corporation into the name of the pledgee) except upon
compliance herewith and any such pledge shall be subject to these conditions and
restrictions.
FIFTH: The name and mailing address of the incorporator is as follows:
NAME MAILING ADDRESS
---- ---------------
Lawrence J. Knopf Gaston & Snow
One Federal Street
Boston, MA 02110
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SIXTH: All corporate powers of the corporation shall be exercised by the
board of directors except as otherwise by law or herein provided.
(a) Directors need not be stockholders of the corporation.
(b) Subject to any limitation contained in the by-laws, the
board of directors may make by-laws, and from time to time may alter, amend or
repeal any by-laws, but and by-laws made by the board of directors may be
altered, amended or repealed by the stockholders at any meeting of stockholders
by the affirmative vote of the holders of a majority of the stock present and
voting at such meeting, provided notice that an amendment is to be considered
and acted upon is inserted in the notice or waiver of notice of such meeting.
(c) The board of directors shall have power from time to time to
fix and determine and to vary the amount of the working capital of the
corporation, to direct and determine the use and disposition thereof, to set
apart out of any funds of the corporation available for dividends a reserve or
reserves for any proper purposes and to abolish any such reserve in the manner
in which it was created.
(d) The board of directors may from time to time determine
whether and to what extent and at which times and places and under what
conditions and regulations the accounts and books of the corporation, or any of
them, shall be open to the inspection of the stockholders, and no stockholder
shall have any right to inspect any account, book or document of the corporation
except as conferred by statute or as authorized by the board of directors.
(e) No contract or other transaction between the corporation and
one or more of its directors or officers, or between the corporation and any
other corporation, Partnership, association or other organization in which one
or more of its directors or officers are directors or officers, or have a
financial or other interest, shall be void or voidable solely for this reason,
or
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<PAGE> 6
solely because the director or officer is present at or Participates in the
meeting of the board or committee thereof which authorizes the contract or other
transaction, or solely because his or their votes are counted for such Purpose.
Provided that the material facts as to such relationship or interest and as to
the contract or other transaction are disclosed or are known (1) to the board of
directors or the committee, and the board or committee in good faith authorizes
the contract or other transaction be the affirmative votes of a majority of the
disinterested directors, even though the disinterested directors be less than a
quorum, or (2) to the stockholders entitled to vote thereon, and the contract or
other transaction is specifically approved in good faith by vote of the
stockholders.
(f) Any contract, act or transaction of the corporation or of the
directors may be ratified by a vote of a majority of the shares having voting
power at any meeting of stockholders, or at any special meeting called for such
purpose, and such ratification shall, so far as permitted by law and by this
certificate of incorporation, be as valid and as binding as though ratified by
every stockholder of the corporation.
(g) Any vote or votes authorizing liquidation of the corporation
or proceedings for its dissolution may provide, subject to the rights of
creditors and rights expressly provided for particular classes or series of
stocks for the distribution pro rata among the stockholders of the corporation
of the assets of the corporation, wholly or in part in kind, whether such assets
be in cash or other property, and may authorize the board of directors of the
corporation to determine the value of the different assets of the corporation
for the purpose of such liquidation and may divide or authorize the board of
directors of the corporation to divide such assets or any part thereof among the
stockholders of the corporation, in such manner that every stockholder will
received a proportionate amount in value (determined as aforesaid) of cash or
property of the
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corporation upon such liquidation or dissolution even though each stockholder
may not receive a strictly proportionate part of each such asset.
(h) Elections of directors need not be by ballot.
(i) The corporation shall, to the extent legally permissible,
indemnify each of its officers and directors against all expenses (including
attorneys' fees), judgments, fines and amounts paid in settlement actually and
reasonably incurred in connection with any action, suit or other proceeding in
which he may be involved or with which he may be threatened, while in office or
thereafter, by reason of his acts or omissions as such director or officer.
SEVENTH: No holder of stock of the corporation shall be entitled as of
right to purchase or subscribe for any part of any unissued stock of the
corporation or any additional stock to be issued by reason of any increase of
the authorized capital stock of the corporation of any class, or any bonds,
certificates of indebtedness, debentures or other securities convertible into
stock of the corporation, but any such unissued stock or such additional
authorized issue of new stock, or such securities convertible into stock, may be
issued and disposed of pursuant to resolution of the board of directors to such
persons, firms, corporations or associations, and upon such terms as may be
deemed advisable by the board of directors in the exercise of their discretion.
EIGHTH: Meetings of stockholders may be held without the State of
Delaware, if the by-laws so provide. The books of the corporation may be kept
(subject to any provision contained in the statutes) outside of the State of
Delaware at such place or places as may be from time to time designated by the
board of directors.
NINTH: The corporation reserves the right to amend, alter, change or
repeal any provisions contained in this Certificate of Incorporation in the
manner now or hereafter
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<PAGE> 8
prescribed by statute, and all rights conferred upon stockholders herein are
granted subject to this reservation.
TENTH: A director of this corporation shall not be personally liable to
the corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director, except that this Article TENTH shall not eliminate or limit
a director's liability (i) for any breach of the director's duty of loyalty to
the corporation and its stockholders; (ii) for acts or omissions not in good
faith or which involve intentional misconduct or a knowing violation of laws;
(iii) under Section 174 of the Delaware General Corporation Law; or (iv) for any
transaction from which the director derived an improper personal benefit. If the
Delaware General Corporation Law is amended after approval by the stockholders
of this Article TENTH to authorize corporate action further eliminating or
limiting the personal liability of directors, then the liability of a director
of the corporation shall be eliminated or limited to the fullest extent
permitted by the Delaware General Corporation Law, as so amended from time to
time.
Any repeal or modification of this Article TENTH shall not increase the
personal liability of any director of this corporation for any act or occurrence
taking place prior to such repeal or modification, or otherwise adversely affect
any right or protection of a director of the corporation existing at the time of
such repeal or modification.
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<PAGE> 9
THE UNDERSIGNED, hereby declaring and certifying that the facts stated
in this Certificate of Incorporation are true, hereunto sets his hand and seal
this 23rd day of March, 1988.
/s/ Lawrence J. Knopf
--------------------------------
Lawrence J. Knopf
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<PAGE> 1
EXHIBIT 3.6
BY-LAWS
OF
SIMONDS HOLDING COMPANY INC.
ARTICLE 1.
CERTIFICATE OF INCORPORATION
These by-laws, the powers of the corporation and of its directors
and stockholders, and all matters concerning the conduct and regulation of the
business of the corporation shall be subject to such provisions in regard
thereto as are set forth in the certificate of incorporation filed pursuant to
the General Corporation Law of Delaware which is hereby made a part of these
by-laws.
The term "certificate of incorporation" in these by-laws, unless the
context requires otherwise, includes not only the original certificate of
incorporation filed to create the corporation but also all other certificates,
agreements of merger or consolidation, plans of reorganization, or other
instruments, howsoever designated, filed pursuant to the General Corporation Law
of Delaware which have the effect of amending or supplementing in some respect
the corporation's original certificate of incorporation.
ARTICLE II.
ANNUAL MEETING
An annual meeting of stockholders shall be held for the election of
directors and for the transaction of any other business for the transaction of
which the meeting shall have been properly convened in each year at such place,
within or without the State of Delaware, and at such time as shall be fixed by
the board of directors and specified in the notice of the meeting, if such date
is not a legal holiday and if a legal holiday, then at the same hour on the next
succeeding day not a legal holiday. Any other proper business may be transacted
at the annual meeting. If the annual meeting for election of directors shall not
be held on the date designated therefor, the directors shall cause the meeting
to be held as soon thereafter as is convenient.
ARTICLE III.
SPECIAL MEETINGS OF STOCKHOLDERS
Special meetings of the stockholders may be held either within or
without the State of Delaware, at such time and place and for such purposes as
shall be specified in a call for such meeting made by the board of directors or
by a writing filed with the secretary signed by the president or by a majority
of the directors.
<PAGE> 2
ARTICLE IV.
NOTICE OF STOCKHOLDERS' MEETINGS
Whenever stockholders are required or permitted to take any action
at a meeting, a written notice of the meeting shall be given which shall state
the place, date and hour of the meeting and, in the case of a special meeting,
the purpose or purposes for which the meeting is called, which notice shall be
given not less than ten nor more than fifty days before the date of the meeting,
except where longer notice is required by law, to each stockholder entitled to
vote at such meeting, by leaving such notice with him or by mailing it, postage
prepaid, directed to him at his address as it appears upon the records of the
corporation. In case of the death, absence, incapacity or refusal of the
secretary, such notice may be given by a person designated either by the
secretary or by the person or persons calling the meeting or by the board of
directors. When a meeting is adjourned to another time or place, notice need not
be given of the adjourned meeting if the time and place thereof are announced at
the meeting at which the adjournment is taken. At the adjourned meeting the
corporation may transact any business which might have been transacted at the
original meeting. If the adjournment is for more than thirty days, or if after
the adjournment a new record date is fixed for the adjourned meeting, a notice
of the adjourned meeting shall be given to each stockholder of record entitled
to vote at the meeting.
An affidavit of the secretary or an assistant secretary or of the
transfer agent of the corporation that the notice has been given shall, in the
absence of fraud, be prima facie evidence of the facts stated therein.
ARTICLE V.
QUORUM OF STOCKHOLDERS; STOCKHOLDER LIST
At any meeting of the stockholders, a majority of all shares issued and
outstanding and entitled to vote upon a question to be considered at the meeting
shall constitute a quorum for the consideration of such question when
represented at such meeting by the holders thereof in person or by their duly
constituted and authorized attorney or attorneys, but a less interest may
adjourn any meeting from time to time, and the meeting may be held as adjourned
without further notice. When a quorum is present at any meeting a majority of
the stock so represented thereat and entitled to vote shall, except where a
larger vote is required by law, by the certificate of incorporation or by these
by-laws, decide any question brought before such meeting.
The secretary or other officer having charge of the stock ledger shall
prepare and make, at least ten days before every meeting of stockholders, a
complete list of the stockholders entitled to vote at the meeting, arranged in
alphabetical order, and showing the address of each stockholder and the number
of shares registered in the name of each stockholder. Such list shall be open to
the examination of any stockholder, for any purpose germane to the meeting,
during ordinary business hours for a period of at least ten days prior to the
meeting, either at a place within the city or town where the meeting is to be
held, which place shall have been specified in the notice
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of the meeting, or, if not so specified, at the place where the meeting is to be
held. Said list shall also be produced and kept at the time and place of the
meeting during the whole time thereof and may be inspected by any stockholder
who is present. The stock ledger shall be the only evidence as to who are the
stockholders entitled to examine the stock ledger, the list of stockholders
required by this Article or the books of the corporation, or the stockholders
entitled to vote in person or by proxy at any meeting of stockholders.
ARTICLE VI.
PROXIES AND VOTING
Except as otherwise provided in the certificate of incorporation,
each stockholder shall at every meeting of the stockholders be entitled to one
vote for each share of the capital stock held by such stockholder. Each
stockholder entitled to vote at a meeting of stockholders or to express dissent
to corporate action in writing without a meeting may authorize another person or
persons to act for him by proxy but (except as otherwise expressly permitted by
law) no proxy shall be voted or acted upon after three years from its date,
unless the proxy provides for a longer period or so long as it is coupled with
an interest sufficient in law to support an irrevocable power.
Unless otherwise provided in the certificate of incorporation, any
action required by law to, or which may, be taken at any annual or special
meeting of stockholders may be taken without a meeting, without prior notice and
without a vote, if a consent in writing, setting forth the action so taken,
shall be signed by the holders of outstanding stock having not less than the
minimum number of votes that would be necessary to authorize or take such action
at a meeting at which all shares entitled to vote therein were present and
voted. Prompt notice of the taking of such action without a meeting by less than
unanimous written consent shall be given to those stockholders who have not
consented in writing.
ARTICLE VII.
STOCKHOLDERS' RECORD DATE
In order that the corporation may determine the stockholders
entitled to notice of or to vote at any meeting of stockholders or any
adjournment thereof, or to express consent to corporate action in writing
without a meeting, or entitled to receive payment of any dividend or other
distribution or allotment of any rights, or entitled to exercise any rights in
respect of any change, conversion or exchange of stock or for the purpose of any
other lawful action, the board of directors may fix, in advance, a record date,
which shall not be more than sixty nor less than ten days before the date of
such meeting, nor more than sixty days prior to any other action.
If no record date is fixed:
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(1) The record date for determining stockholders entitled to notice of
or to vote at a meeting of stockholders shall be at the close of business on the
day next preceding the day on which notice is given, or, if notice is waived, at
the close of business on the day next preceding the day on which the meeting is
held.
(2) The record date for determining stockholders entitled to express
consent to corporate action in writing without a meeting, when no prior action
by the board of directors is necessary, shall be the day on which the first
written consent is expressed.
(3) The record date for determining stockholders for any other purpose
shall be at the close of business on the day on which the board of directors
adopts the resolution relating thereto.
A determination of stockholders of record entitled to notice of or to
vote at a meeting of stockholders shall apply to any adjournment of the meeting,
provided, however, that the board of directors may fix a new record date for the
adjourned meeting.
ARTICLE VIII.
BOARD OF DIRECTORS
Except as otherwise provided by law or by the certificate of
incorporation, the business and affairs of the corporation shall be managed by
the board of directors.
The number of directors shall be such number, not fewer than one nor
more than four, as may be fixed for any corporate year and elected by the
stockholders at the annual meeting. During any year the board of directors may
be enlarged and additional directors elected to complete the enlarged number, to
not more than the maximum number above specified, by the stockholders at any
meeting or by a vote of a majority of the directors then in office. The
stockholders may, at any meeting held for the purpose during such year,
decrease, to not fewer than the minimum number above specified, the number of
directors as thus fixed or enlarged and remove directors to the decreased
number. Each director shall hold office until his successor is elected and
qualified or until his earlier resignation or removal. Any director may resign
at any time upon written notice to the corporation. No director need be a
stockholder.
ARTICLE IX.
COMMITTEES
The board of directors may, by resolution passed by a majority of the
whole board, designate one or more committees, each committee to consist of one
or more of the directors of the corporation. The board may designate one or more
directors as alternate members of any committee who may replace any absent or
disqualified member at any meeting of the committee and may define the number
and qualifications which shall constitute a quorum of such
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committee. Except as otherwise limited by law, any such committee, to the extent
provided in the resolution appointing such committee, shall have and may
exercise the powers of the board of directors in the management of the business
and affairs of the corporation, and may authorize the seal of the corporation to
be affixed to all papers which may require it. In the absence or
disqualification of a member of committee, the member or members thereof present
at any meeting and not disqualified from voting, whether or not he or they
constitute a quorum, may unanimously appoint another member of the board of
directors to act at the meeting in the place of any such absent or disqualified
member.
ARTICLE X.
MEETINGS OF THE BOARD OF DIRECTORS AND OF COMMITTEES
Regular meetings of the board of directors may be held without call or
formal notice at such places either within or without the State of Delaware and
at such times as the board may by vote from time to time determine.
Special meetings of the board of directors may be held at any place
either within or without the State of Delaware at any time when called by the
president, treasurer, secretary or two or more directors, reasonable notice of
the time and place thereof being given to each director. A waiver of such notice
in writing, signed by the person or persons entitled to said notice, whether
before or after the time stated therein, shall be deemed equivalent to such
notice. In any case it shall be deemed sufficient notice to a director to send
notice by mail at least forty-eight hours, or to deliver personally or to send
notice by telegram at least twenty-four hours, before the meeting, addressed to
him at his usual or last known business or residence address.
Unless otherwise restricted by the certificate of incorporation or by
other provisions of these by-laws, (a) any action required or permitted to be
taken at any meeting of the board of directors or of any committee thereof may
be taken without a meeting if all members of the board or of such committee, as
the case may be, consent thereto in writing and such writing or writings are
filed with the minutes of proceedings of the board or committee, and (b) members
of the board of directors or of any committee designated by the board may
participate in a meeting thereof by means of conference telephone or similar
communications equipment by means of which all persons participating in the
meeting can hear each other, and such participation shall constitute presence in
person at such meeting.
ARTICLE XI.
QUORUM OF THE BOARD OF DIRECTORS
Except as otherwise expressly provided in the certificate of
incorporation or in these by-laws, a majority of the total number of directors
at the time in office shall constitute a quorum for the transaction of business,
but a smaller number of directors may adjourn any meeting from time to time.
Except as otherwise so expressly provided, the vote of a majority of the
directors present at any meeting at which a quorum is present shall be the act
of the board of directors,
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provided, that the affirmative vote in good faith of a majority of the
disinterested directors, even though the disinterested directors shall be fewer
than a quorum, shall be sufficient to authorize a contract or transaction in
which one or more directors have interest if the material facts as to such
interest and the relation of the interested directors to the contract or
transaction have been disclosed or are known to the directors.
ARTICLE XII.
WAIVER OF NOTICE OF MEETINGS
Whenever notice is required to be given under any provision of law or
the certificate of incorporation or by-laws, a written waiver thereof, signed by
the person entitled to notice, whether before or after the time stated therein,
shall be deemed equivalent to notice. Attendance of a person at a meeting shall
constitute a waiver of notice of such meeting, except when the person attends a
meeting for the express purpose of objecting, at the beginning of the meeting,
to the transaction of any business because the meeting is not lawfully called or
convened. Neither the business to be transacted at, nor the purpose of, any
regular or special meeting of the stockholders, directors or members of a
committee of directors need be specified in any written waiver of notice unless
so required by the certificate of incorporation or the by-laws.
ARTICLE XIII.
OFFICERS AND AGENTS
The corporation shall have a president, secretary and treasurer, who
shall be chosen by the directors, each of whom shall hold his office until his
successor has been chosen and qualified or until his earlier resignation or
removal. The corporation may have such other officers and agents as are desired,
each of whom shall be chosen by the board of directors and shall hold his office
for such term and have such authority and duties as shall be determined by the
board of directors. The board of directors may secure the fidelity of any or all
of such officers or agents by bond or otherwise. Any number of offices may be
held by the same person. Each officer shall, subject to these by-laws, have in
addition to the duties and powers herein set forth, such duties and powers as
the board of directors shall from time to time designate. In all cases where the
duties of any officer, agent or employee are not specifically prescribed by the
by-laws, or by the board of directors, such officer, agent or employee shall
obey the orders and instructions of the chief executive officer. Any officer may
resign at any time upon written notice to the corporation.
ARTICLE XIV.
PRESIDENT
The president shall, subject to the direction and under the supervision
of the board of directors, be the chief executive officer of the corporation,
and shall have general and active control of the affairs and business of the
corporation and general supervision over its officers,
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agents and employees. Except as otherwise voted by the board, he shall preside
at all meetings of the stockholders and of the board of directors at which he is
present. The president shall have custody of the treasurer's bond, if any.
ARTICLE XV.
SECRETARY
The secretary shall record all the proceedings of the meetings of the
stockholders and directors in a book, which shall be the property of the
corporation, to be kept for that purpose; and perform such other duties as shall
be assigned to him by the board of directors. In the absence of the secretary
from any such meeting, a temporary secretary shall be chosen, who shall record
the proceedings of such meeting in the aforesaid book.
ARTICLE XVI.
TREASURER
The treasurer shall, subject to the direction and under the supervision
of the board of directors, have the care and custody of the funds and valuable
papers of the corporation, except his own bond, and he shall, except as the
board of directors shall generally or in particular cases authorize the
endorsement thereof in some other manner, have power to endorse for deposit or
collection all notes, checks, drafts and other obligations for the payment of
money to the corporation or its order. He shall keep, or cause to be kept,
accurate books of account, which shall be the property of the corporation.
ARTICLE XVII.
REMOVALS
The stockholders may, at any meeting called for the purpose, by vote of
a majority of the capital stock issued and outstanding and entitled to vote
thereon, remove any director from office.
The board of directors may, at any meeting called for the purpose, by
vote of a majority of their entire number remove from office any officer or
agent of the corporation or any member of any committee appointed by the board
of directors or by any committee appointed by the board of directors or by any
officer or agent of the corporation.
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ARTICLE XVIII.
VACANCIES
Any vacancy occurring in any office of the corporation by death,
resignation, removal or otherwise and newly created directorships resulting from
any increase in the authorized number of directors, may be filled by a majority
of the directors then in office (though less than a quorum) or by a sole
remaining director and each of the incumbents so chosen shall hold office for
the unexpired term in respect of which the vacancy occurred and until his
successor shall have been duly elected and qualified or for such shorter period
as shall be specified in the filling of such vacancy or, if such vacancy shall
have occurred in the office of director, until such a successor shall have been
chosen by the stockholders.
ARTICLE XIX.
CERTIFICATES OF STOCK
Every holder of stock in the corporation shall be entitled to have a
certificate signed by, or in the name of the corporation by the chairman or
vice-chairman of the board of directors (if one shall be incumbent) or the
president or a vice-president and by the treasurer or an assistant treasurer, or
the secretary or an assistant secretary, certifying the number of shares owned
by him in the corporation. If such certificate is countersigned (1) by a
transfer agent other than the corporation or its employee, or (2) by a registrar
other than the corporation of its employee, any other signatures on the
certificate may be facsimile. In case any officer who has signed or whose
facsimile signature has been placed upon a certificate shall have ceased to be
such officer before such certificate is issued, it may be issued by the
corporation with the same effect as if he were such officer at the date of
issue.
If the corporation shall be authorized to issue more than one class of
stock or more than one series of any class, the designations, preferences and
relative, participating, optional or other special rights of each class of stock
or series thereof and the qualifications, limitations or restrictions of such
preferences and/or rights shall be set forth in full or summarized on the face
or back of the certificates which the corporation shall issue to represent such
class or series of stock or there shall be set forth on the face or back of the
certificates which the corporation shall issue to represent such class or series
of stock, a statement that the corporation will furnish, without charge to each
stockholder who so requests, the designations, preferences and relative,
participating, optional or other special rights of each class of stock or series
thereof and the qualifications, limitations or restrictions of such preferences
and/or rights. Any restriction imposed upon the transfer of shares or
registration of transfer of shares shall be noted conspicuously on the
certificate representing the shares subject to such restriction.
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ARTICLE XX.
LOSS OF CERTIFICATE
The corporation may issue a new certificate of stock in place of any
certificate theretofore issued by it, alleged to have been lost, stolen or
destroyed, and the directors may require the owner of the lost, stolen or
destroyed certificate, or his legal representative, to give the corporation a
bond sufficient to indemnify it against any claim that may be made against it on
account of the alleged loss, theft or destruction of any such certificate or the
issuance of such new certificate in its place and upon such other terms or
without any such bond which the board of directors shall prescribe.
ARTICLE XXI.
SEAL
The corporate seal shall, subject to alteration by the board of
directors, consist of a flat-faced circular die with the word "Delaware"
together with the name of the corporation and the year of its organization cut
or engraved thereon. The corporate seal may be used by causing it or a facsimile
thereof to be impressed or affixed or reproduced or otherwise.
ARTICLE XXII.
EXECUTION OF PAPERS
Except as otherwise provided in these by-laws or as the board of
directors may generally or in particular cases authorize the execution thereof
in some other manner, all deeds, leases, transfers, contracts, bonds, notes,
checks, drafts and other obligations made, accepted or endorsed by the
corporation, shall be signed by the president or by the treasurer.
ARTICLE XXIII.
FISCAL YEAR
Except as from time to time otherwise provided by the board of
directors, the fiscal year of the corporation shall end on the last day of
December of each year.
ARTICLE XXIV.
AMENDMENTS
Except as otherwise provided by law or by the certificate of
incorporation, these by-laws, as from time to time altered or amended, may be
made, altered or amended at any annual or special meeting of the stockholders
called for the purpose, of which the notice shall specify the
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subject matter of the proposed alteration or amendment or new by-law or the
article or articles to be affected thereby. If the certificate of incorporation
so provides, these by-laws may also be made, altered or amended by a majority of
the whole number of directors. Such action may be taken at any meeting of the
board of directors, of which notice shall have been given as for a meeting of
stockholders.
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EXHIBIT 3.7
ARTICLES OF INCORPORATION
OF
SIMONDS INDUSTRIES FSC, INC.
We the undersigned natural persons of lawful age, acting as
incorporators of a corporation under Title 13, Virgin Islands Code, adopt the
following Articles of Incorporation for such corporation.
FIRST: The name of the corporation is SIMONDS INDUSTRIES FSC, INC.
SECOND: The corporate purposes are:
1. General - To engage in the business of importation and exportation of
goods, and in general to do all things necessary and proper in connection
therewith.
2. Ancillary - To do everything necessary, proper, advisable or
convenient for the accomplishment of the purposes hereinabove set forth, and to
do all other things incidental thereto connected therewith which are not
forbidden by statute or by these Articles.
3. Foreign Sales Corporation - To undertake the business of a Foreign
Sales Corporation.
4. Business Outside Territory - To conduct and carry out its business in
any state or territory of the United States or in any foreign country.
5. Other - To engage in any other business activity or enterprise not
prohibited by law.
THIRD: The aggregate number of shares which the corporation shall
have authority to issue is one thousand (1,000) shares at no par value.
FOURTH: The minimum amount of capital with which the corporation shall
commence business shall be One Thousand Dollars ($1,000.00).
FIFTH: The address of the initial registered office of the
corporation shall be #4 Orange Grove, P.O. Box 699, Christiansted, St. Croix,
U.S. Virgin Islands 00820.
SIXTH: The name of the initial registered agent of the corporation is
CHASE TRADE, INC., #4 Orange Grove, P.O. Box 699, Christiansted, St. Croix, U.S.
Virgin Islands 00820.
SEVENTH: The corporation shall have perpetual existence.
<PAGE> 2
EIGHTH: The number of directors shall be provided by the By Laws, and
shall not be less than three.
NINTH: The names and addresses of the persons forming the corporation
are: SANDRA L. HARRIS, MARTHA T. FRANCIS and MADELON P. TAYLOR, of #7 King
Street, Christiansted, St. Croix, U.S. Virgin Islands 00820.
TENTH: The corporation shall have all rights and powers granted to a
corporation by law, and all powers necessary or convenient to carry out the
purposes set forth in Article Second, and to act as principal, agent, partner or
in any other capacity which may be authorized or approved by the Board of
Directors of this corporation.
IN WITNESS WHEREOF, the incorporators have signed these Articles of
Incorporation at Christiansted, St. Croix, U.S. Virgin Islands, on this 3rd day
of October, 1988.
IN WITNESS: INCORPORATORS:
/s/ Jacqueline Benjamin /s/ Sandra L. Harris
- ----------------------------- --------------------------------
SANDRA L. HARRIS
/s/ FLORENCE B [ ] /s/ Martha T. Francis
- ----------------------------- --------------------------------
MARTHA T. FRANCIS
/s/ Madelon P. Taylor
--------------------------------
MADELON P. TAYLOR
ACKNOWLEDGMENT
TERRITORY OF THE VIRGIN ISLANDS)
DIVISION OF ST. CROIX ) SS:
On this 3rd day of October, 1988, before me, the undersigned officer,
personally appeared SANDRA L. HARRIS, MARTHA T. FRANCIS and MADELON P. TAYLOR,
known to me (or satisfactorily proven) to be the individuals whose names are
subscribed to the foregoing ARTICLES OF INCORPORATION; and they acknowledged to
me that they executed same freely and voluntarily for the uses and purposes
therein contained.
IN WITNESS WHEREOF, I hereunto set my hand and seal.
/s/ [ ]
--------------------------------
NOTARY PUBLIC
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EXHIBIT 3.8
BY LAWS
of
SIMONDS INDUSTRIES FSC, INC.
ARTICLE I - OFFICERS
The principal office of the corporation in the Territory of the U.S.
Virgin Islands shall be located in Christiansted, St. Croix, U.S. Virgin
Islands. The corporation may have such other offices, either within or
without the Territory of incorporation, as the board of directors may
designate or as the business of the corporation may from time to time
require.
ARTICLE II - STOCKHOLDERS
1. ANNUAL MEETING.
The annual meeting of the stockholders shall be held on the February 15th
of each year, beginning with the year 1989, for the purpose of electing
directors and for the transaction of such other business as may come before
the meeting. If the day fixed for the annual meeting shall be a legal
holiday, such meeting shall be held on the next succeeding business day.
2. SPECIAL MEETINGS.
Special meetings of the stockholders, for any purpose or purposes, unless
otherwise prescribed by statute, may be called by the president or by the
directors, and shall be called by the president at the request of the holders
of not less than one hundred percent (100%) of all the outstanding shares of
the corporation entitled to vote at the meeting.
3. PLACE OF MEETING.
The directors may designate any place, either within or without the
Territory unless otherwise prescribed by statute, as the place of meeting for
any annual meeting or for any special meeting called by the directors. A
waiver of notice signed by all stockholders entitled to vote at a meeting may
designate any place, either within or without the Territory, unless otherwise
prescribed by statute, as the place for holding such meeting. If no
designation is made, or if a special meeting be otherwise called, the place
of meeting shall be the principal office of the corporation.
4. NOTICE OF MEETING.
Written or printed notice stating the place, day and hour of the meeting
and in case of a special meeting, the purpose or purposes for which the
meeting is called, shall be delivered not less than 30 days nor more than 120
days before the date of the meeting, either personally or by mail, by or at
the direction of the president, or the secretary, or the officer or persons
calling the meeting, to each stockholder of record entitled to vote at such
meeting. If mailed, such notice shall be deemed to be delivered when
deposited in the United States mail, addressed to the stockholder at his
address as it appears on the stock transfer books of the corporation, with
postage thereon prepaid.
<PAGE> 2
5. CLOSING OF TRANSFER BOOKS OR FIXING OF RECORD DATE.
For the purpose of determining stockholders entitled to notice of, or to
vote at, any meeting of stockholders or any adjournment thereof, or
stockholders entitled to receive payment of any dividend, or in order to make
a determination of stockholders for any other proper purpose, the directors
of the corporation may provide that the stock transfer books shall be closed
for a stated period but not to exceed, in any case, 30 days. If the stock
transfer books shall be closed for the purpose of determining stockholders
entitled to notice of, or to vote at, a meeting of stockholders, such books
shall be closed for at least 30 days immediately preceding such meeting. In
lieu of closing the stock transfer books, the directors may fix in advance a
date as the record date for any such determination of stockholders, such date
in any case to be not more than 30 days and in case of a meeting of
stockholders, not less than 30 days prior to the date on which the particular
action requiring such determination of stockholders is to be taken. If the
stock transfer books are not closed and no record date is fixed for the
determination of stockholders entitled to notice of, or to vote at, a meeting
of stockholders, or stockholders entitled to receive payment of a dividend,
the date on which notice of the meeting is mailed or the date on which the
resolution of the directors declaring such dividend is adopted, as the case
may be, shall be the record date for such determination of stockholders. When
a determination of stockholders entitled to vote at any meeting of
stockholders has been made as provided in this section, such determination
shall apply to any adjournment thereof.
6. VOTING LISTS.
The officer or agent having charge of the stock transfer books for shares
of the corporation shall make, at least 10 days before each meeting of
stockholders, a complete list of the stockholders entitled to vote at such
meeting, or any adjournment thereof, arranged in alphabetical order, with the
address of and the number of shares held by each, which list, for a period of
10 days prior to such meeting, shall be kept on file at the principal office
of the corporation and shall be subject to inspection by any stockholder at
any time during usual business hours. Such list shall also be produced and
kept open at the time and place of the meeting and shall be subject to the
inspection of any stockholder during the whole time of the meeting. The
original stock transfer book shall be prima facie evidence as to who are the
stockholders entitled to examine such list or transfer books or to vote at
the meeting of stockholders.
7. QUORUM.
At any meeting of stockholders 100 percent of the outstanding shares of
the corporation entitled to vote, represented in person or by proxy, shall
constitute a quorum at a meeting of stockholders. If less than said number of
the outstanding shares are represented at a meeting, a majority of the shares
so represented may adjourn the meeting from time to time without further
notice. At such adjourned meeting at which a quorum shall be present or
represented, any business may be transacted which might have been transacted
at the meeting as originally notified. The stockholders present at a duly
organized meeting may continue to transact business until adjournment,
notwithstanding the withdrawal of enough stockholders to leave less than a
quorum.
<PAGE> 3
8. PROXIES.
At all meetings of stockholders, a stockholder may vote by proxy executed
in writing by the stockholder or by his duly authorized attorney in fact.
Such proxy shall be filed with the secretary of the corporation before or at
the time of the meeting.
9. VOTING.
Each stockholder entitled to vote in accordance with the terms and
provisions of the Certificate of Incorporation and these By Laws shall be
entitled to one vote, in person or by proxy, for each share of stock entitled
to vote held by such stockholder. Upon the demand of any stockholder, the
vote for directors and upon any question before the meeting shall be by
ballot. All elections for directors shall be decided by plurality vote; all
other questions shall be decided by majority vote except as otherwise
provided by the Certificate of Incorporation or the laws of this Territory.
10. ORDER OF BUSINESS.
The order of business at all meetings of the stockholders shall be as
follows:
1. Roll Call.
2. Proof of notice of meeting or waiver of notice.
3. Reading of minutes of preceding meeting.
4. Reports of Officers.
5. Reports of Committees.
6. Election of Directors.
7. Unfinished Business.
8. New Business.
11. INFORMAL ACTION BY STOCKHOLDERS.
Unless otherwise provided by law, any action required to be taken at a
meeting of the shareholders, or any other action which may be taken at a
meeting of the shareholders, may be taken without a meeting if a consent in
writing, setting forth the action so taken, shall be signed by all of the
shareholders entitled to vote with respect to the subject matter thereof.
ARTICLE III - BOARD OF DIRECTORS
1. GENERAL POWERS.
The business and affairs of the corporation shall be managed by its board
of directors. The directors shall in all cases act as a board, and they may
adopt such rules and regulations for the conduct of their meetings and the
management of the corporation as they may deem proper, not inconsistent with
these By Laws and the laws of this Territory.
2. NUMBER, TENURE AND QUALIFICATIONS.
The number of Directors of the corporation shall be five. Each director
shall hold office until the next annual meeting of stockholders and until his
successor shall have been elected and qualified.
<PAGE> 4
3. REGULAR MEETINGS.
A regular meeting of the directors shall be held without other notice than
this By Law immediately after, and at the same place as, the annual meeting
of stockholders. The directors may provide by resolution the time and place
for the holding of additional regular meetings, without other notice than
such resolution.
4. SPECIAL MEETINGS.
Special meetings of the directors may be called by or at the request of
the president or any two directors. The person or persons authorized to call
special meetings of the directors may fix the place for holding any special
meeting of the directors called by them.
5. NOTICE.
Notice of any special meeting shall be given at least 30 days previously
thereto by written notice delivered personally, or by telegram, or mailed to
each director at his business address. If mailed, such notice shall be deemed
to be delivered when deposited in the United States mail so addressed with
postage thereon prepaid. If notice be given by telegram, such notice shall be
deemed to be delivered when the telegram is delivered to the telegraph
company. The attendance of a director at a meeting shall constitute a waiver
of notice of such meeting, except where a director attends a meeting for the
express purpose of objecting to the transaction of any business because the
meeting in not lawfully called or convened.
6. QUORUM.
At any meeting of the directors two shall constitute a quorum for the
transaction of business, but if less than said number in present at a
meeting, a majority of the directors present may adjourn the meeting from
time to time without further notice.
7. MANNER OF ACTING.
The act of the majority of the Directors present at a meeting at which a
quorum is present shall be the act of the directors.
8. NEWLY CREATED DIRECTORSHIPS AND VACANCIES.
Newly created directorships resulting from an increase in the number of
directors and vacancies occurring in the board for any reason except the
removal of directors without cause may be filled by a vote of a majority of
the directors then in office, although less than a quorum exists. Vacancies
occurring by reason of the removal of directors without cause shall be filled
by vote of the stockholders. A director elected to fill a vacancy caused by
resignation, death or removal shall be elected to hold office for the
unexpired term of his predecessor.
9. REMOVAL OF DIRECTORS.
Any or all of the directors may be removed for cause by vote of the
stockholders or by action of the board. Directors may be removed without
cause only by vote of the stockholders.
<PAGE> 5
10. RESIGNATION.
A director may resign at any time by giving written notice to the board,
the president or the secretary of the corporation. Unless otherwise specified
in the notice, the resignation shall take effect upon receipt thereof by the
board or such officer, and the acceptance of the resignation shall not be
necessary to make it effective.
11. COMPENSATION.
No compensation shall be paid to directors, as such, for their services,
but by resolution of the board a fixed sum and expenses for actual attendance
at each regular or special meeting of the board may be authorized. Nothing
herein contained shall be construed to preclude any director from serving the
corporation in any other capacity and receiving compensation therefor.
12. PRESUMPTION OF ASSENT.
A director of the corporation who is present at a meeting of the directors
at which action on any corporate matter is taken shall be presumed to have
assented to the action taken unless he abstained from voting or his dissent
shall be entered in the minutes of the meeting or unless he shall file his
written dissent to such action with the person acting as the secretary of the
meeting before the adjournment thereof or shall forward such dissent by
registered mail to the secretary of the corporation immediately after the
adjournment of the meeting. Such right to dissent shall not apply to a
director who voted in favor of such action.
13. EXECUTIVE AND OTHER COMMITTEES.
The boards, by resolution, may designate from among its members an
executive committee and other committees, each consisting of two or more
directors. Each such committee shall serve at the pleasure of the board.
14. SPECIAL MEETINGS - CONFERENCE BY TELEPHONE.
Special meetings of the board of directors may be held by means of
telephone conferences or equipment of similar communications by means of
which all directors participating in the meeting can hear each other.
Participating in a meeting by telephone or similar communications equipment
shall constitute presence in person at the special meeting, except where a
director participated in a meeting for the sole purpose of objecting to the
transaction of any business on the ground that the special meeting is not
lawfully convened or called.
15. INFORMAL ACTION BY DIRECTORS.
Unless otherwise provided by law, any action required to be taken at a
meeting of the directors, or any other action which may be taken at a meeting
of the directors, may be taken without a meeting if a consent in writing,
setting forth the action so taken, shall be signed by all of the directors.
<PAGE> 6
16. DEATH OF NON-U.S. RESIDENT DIRECTOR.
In the event of the death or change in residency of a director who was not
a resident of the United States, the manager of the Chase Manhattan Bank,
Orange Grove Branch, shall instantaneously and automatically be substituted
as a director of the corporation.
ARTICLE IV - OFFICERS
1. NUMBER.
The officers of the corporation shall be a president, a vice president, a
secretary and a treasurer, each of whom shall be elected by the directors.
Such other officers and assistant officers as may be deemed necessary may be
elected or appointed by the directors.
2. ELECTION AND TERM OF OFFICE.
The officers of the corporation to be elected by the directors shall be
elected annually at the first meeting of the directors held after each annual
meeting of the stockholders. Each officer shall hold office until his
successor shall have been duly elected and shall have qualified, or until his
death, or until he shall resign or shall have been removed in the manner
hereinafter provided.
3. REMOVAL.
Any officer or agent elected or appointed by the directors may be removed
by the directors whenever in their judgment the best interests of the
corporation would be served thereby, but such removal shall be without
prejudice to the contract rights, if any, of the person so removed.
4. VACANCIES.
A vacancy in any office because of death, resignation, removal,
disqualification or otherwise, may be filled by the directors for the
unexpired portion of the term.
5. PRESIDENT.
The president shall be the principal executive officer of the corporation
and, subject to the control of the directors, shall in general supervise and
control all of the business and affairs of the corporation. He shall, when
present, preside at all meetings of the stockholders and of the directors. He
may sign, with the secretary or any other proper officer of the corporation
thereunto authorized by the directors, certificates for shares of the
corporation, any deeds, mortgages, bonds, contracts, or other instruments
which the directors have authorized to be executed, except in cases where the
signing and execution thereof shall be expressly delegated by the directors
or by these By Laws to some other officer or agent of the corporation, or
shall be required by law to be otherwise signed or executed; and in general
shall perform all duties incident to the office of president and such other
duties as may be prescribed by the directors from time to time.
<PAGE> 7
6. VICE PRESIDENT.
In the absence of the president or in event of his death, inability or
refusal to act, the vice president shall perform the duties of the president,
and when so acting, shall have all the powers of and be subject to all the
restrictions upon the president. The vice president shall perform such other
duties as from time to time may be assigned to him by the president or by the
directors.
7. SECRETARY.
The secretary shall keep the minutes of the stockholders' and of the
directors' meetings in one or more books provided for that purpose, see that
all notices are duly given in accordance with the provisions of these By Laws
or as required, be custodian of the corporate records and of the seal of the
corporation and keep a register of the post office address of each
stockholder which shall be furnished to the secretary by such stockholder,
have general charge of the stock transfer books of the corporation and in
general perform all duties incident to the office of secretary and such other
duties as from time to time may be assigned to him by the president or by the
directors.
8. TREASURER.
If required by the directors, the treasurer shall give a bond for the
faithful discharge of his duties in such sum and with such surety or sureties
as the directors shall determine. He shall have charge and custody of, and be
responsible for, all funds and securities of the corporation; receive and
give receipts for moneys due and payable to the corporation from any source
whatsoever, and deposit all such moneys in the name of the corporation in
such banks, trust companies or other depositories as shall be selected in
accordance with these By Laws and in general perform all of the duties
incident to the office of treasurer and such other duties as from time to
time may be assigned to him by the president or by the directors.
9. SALARIES.
The salaries of the officers shall be fixed from time to time by the
directors and no officer shall be prevented from receiving such salary by
reason of the fact that he is also a director of the corporation.
ARTICLE V - CONTRACTS, LOANS, CHECKS AND DEPOSITS
1. CONTRACTS.
The directors may authorize any officer or officers, agent or agents, to
enter into any contract or execute and deliver any instrument in the name of
and on behalf of the corporation, and such authority may be general or
confined to specific instances.
2. LOANS.
No loans shall be contracted on behalf of the corporation and no evidences
of indebtedness shall be issued in its name unless authorized by a resolution
of the directors. Such authority may be general or confined to specific
instances.
<PAGE> 8
3. CHECKS, DRAFTS, ETC.
All checks, drafts or other orders for the payment of money, notes or
other evidences of indebtedness issued in the name of the corporation, shall
be signed by such officer or officers, agent or agents of the corporation and
in such manner as shall from time to time be determined by resolution of the
directors.
4. DEPOSITS.
All funds of the corporation not otherwise employed shall be deposited
from time to time to the credit of the corporation in such banks, trust
companies or other depositories as the directors may select.
ARTICLE VI - CERTIFICATES FOR SHARES AND THEIR TRANSFER
1. CERTIFICATES FOR SHARES.
Certificates representing shares of the corporation shall be in such form
as shall be determined by the directors. Such certificates shall be signed by
the president and by the secretary or by such other officers authorized by
law and by the directors. All certificates for shares shall be consecutively
numbered or otherwise identified. The name and address of the stockholders,
the number of shares and date of issue, shall be entered on the stock
transfer books of the corporation. All certificates surrendered to the
corporation for transfer shall be cancelled and no new certificate shall be
issued until the former certificate for a like number of shares shall have
been surrendered and cancelled, except that in case of a lost, destroyed or
mutilated certificate a new one may be issued therefor upon such terms and
indemnity to the corporation as the directors may prescribe.
2. TRANSFERS OF SHARES.
(a) Upon surrender to the corporation or the transfer agent of the
corporation of a certificate for shares duly endorsed or accompanied by
proper evidence of succession, assignment or authority to transfer, it shall
be the duty of the corporation to issue a new certificate to the person
entitled thereto, and cancel the old certificate; every such transfer shall
be entered on the transfer book of the corporation which shall be kept at its
principal office.
(b) The corporation shall be entitled to treat the holder of record of any
share as the holder in fact thereof, and accordingly, shall not be bound to
recognize any equitable or other claim to, or interest in, such share on the
part of any other person whether or not it shall have express or other notice
thereof, except as expressly provided by the laws of this Territory.
ARTICLE VII - FISCAL YEAR
The fiscal year of the corporation shall begin on the date of
incorporation.
<PAGE> 9
ARTICLE VIII - DIVIDENDS
The directors may from time to time declare, and the corporation may pay,
dividends on its outstanding shares in the manner and upon the terms and
conditions provided by law.
ARTICLE IX - SEAL
The directors shall provide a corporate seal which shall be circular in
form and shall have inscribed thereon the name of the corporation, the
Territory of incorporation, year of incorporation and the words, "Corporate
Seal".
ARTICLE X - WAIVER OF NOTICE
Unless otherwise provided by law, whenever any notice is required to be
given to any stockholder or director of the corporation under the provisions
of these By Laws or under the provisions of the Articles of Incorporation, a
waiver thereof in writing, signed by the person or persons entitled to such
notice, whether before or after the time stated therein, shall be deemed
equivalent to the giving of such notice.
ARTICLE XI - AMENDMENTS
These By Laws may be altered, amended or repealed and new By Laws may be
adopted by a vote of the stockholders representing a majority of all the
shares issued and outstanding, at any annual stockholders' meeting or at any
special stockholders' meeting when the proposed amendment has been set out in
the notice of such meeting.
ARTICLE XII - INDEMNIFICATION OF DIRECTORS AND OFFICERS
Each director and officer of the corporation now or hereafter serving as
such, shall be defended and indemnified by the corporation and the
shareholders against any and all claims and liabilities to which he has or
shall become subject by reason of serving or having served as such director
or officer, or by reason of any action alleged to have been taken, omitted,
or neglected by him as such director or officer; and the corporation shall
reimburse each such person for all legal expenses and costs reasonably
incurred by him in connection with any such claim or liability, provided,
however, that no such person shall be indemnified against, or be reimbursed
for any expense incurred in connection with any claim or liability arising
out of his own willful misconduct or gross negligence. The corporation may
purchase and maintain insurance to cover the liability of the corporation set
forth herein.
ARTICLE XIII - FSC ELECTION AND COMPLIANCE
The corporation will elect to become a Foreign Sales Corporation, pursuant
to the Internal Revenue Code Section 921, et seq.
<PAGE> 10
Except in the event that "small FSC" status is elected, the meetings of
the Board of Directors and Shareholders shall be held outside of the United
States, and, at least once annually, a Board of Directors' meeting and a
Shareholders' meeting must be held in the U.S. Virgin Islands. Any terms to
the contrary contained in Article II, Paras. 3 and 11, and Article III Paras.
3, 4, 14 and 15 shall be specifically overridden by this Article XIII, except
if "small FSC" status is elected.
It is the intention of the corporation that these By Laws shall be
interpreted and followed in such a manner that the corporation shall qualify
as a Foreign Sales Corporation.
Without the necessity of a meeting of the Board of Directors, the
corporation shall, subsequent to its FSC election, change its fiscal year to
that of the principal stockholder of the corporation, to wit: the fiscal year
shall begin on the first day of January of each year.
<PAGE> 1
EXHIBIT 4.1
================================================================================
INDENTURE
Dated as of July 7, 1998
among
SIMONDS INDUSTRIES INC.,
as Issuer,
ARMSTRONG MANUFACTURING COMPANY, INC.,
SIMONDS HOLDING COMPANY, INC.
and
SIMONDS INDUSTRIES FSC, INC.,
as Guarantors,
and
STATE STREET BANK AND TRUST COMPANY,
as Trustee
----------------
up to $150,000,000
10 1/4% Senior Subordinated Notes due 2008, Series A
10 1/4% Senior Subordinated Notes due 2008, Series B
================================================================================
<PAGE> 2
CROSS-REFERENCE TABLE
TIA Indenture
Section Section
- ------- -------
310(a)(1)................................................ 7.10
(a)(2)................................................ 7.10
(a)(3)................................................ N.A.
(a)(4)................................................ N.A.
(a)(5)................................................ 7.10
(b)................................................... 7.08; 7.10
(c)................................................... N.A.
311(a)................................................... 7.11
(b)................................................... 7.11
8
312(a)................................................... 2.05
(b)................................................... 11.03
(c)................................................... 11.03
313(a)................................................... 7.06
(b)(1)................................................ 7.06
(b)(2)................................................ 7.06; 7.07
(c)................................................... 7.05; 7.06; 11.02
(d)................................................... 7.06
314(a)................................................... 4.08; 4.10; 11.02
(b)................................................... N.A.
(c)(1)................................................ 4.08; 11.04
(c)(2)................................................ 11.04
(c)(3................................................. 4.08; 11.04
(d)................................................... N.A.
(e)................................................... 11.05
(f)................................................... N.A.
315(a)................................................... 7.01(b)
(b)................................................... 7.05; 11.02
(c)................................................... 7.01(a)
(d)................................................... 7.01(c)
(e)................................................... 6.11
316(a)(last sentence).................................... 2.09
(a)(1)(A)............................................. 6.05
(a)(1)(B)............................................. 6.04
(a)(2)................................................ N.A.
(b)................................................... 6.07; 9.04
(c)................................................... 9.04
317(a)(1)................................................ 6.08
(a)(2)................................................ 6.09
(b)................................................... 2.04
318(a)................................................... 11.01
<PAGE> 3
(c)................................................... 11.01
- ---------------
"N.A." means Not Applicable.
NOTE: This Cross-Reference Table shall not, for any purpose, be deemed to be
a part of the Indenture.
<PAGE> 4
TABLE OF CONTENTS
Page
----
ARTICLE ONE
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.01. Definitions................................................. 1
SECTION 1.02. Incorporation by Reference of TIA........................... 27
SECTION 1.03. Rules of Construction....................................... 27
ARTICLE TWO
THE SECURITIES
SECTION 2.01. Form and Dating............................................. 28
SECTION 2.02. Execution and Authentication................................ 29
SECTION 2.03. Registrar and Paying Agent.................................. 30
SECTION 2.04. Paying Agent To Hold Assets in Trust........................ 30
SECTION 2.05. Securityholder Lists........................................ 30
SECTION 2.06. Transfer and Exchange....................................... 31
SECTION 2.07. Replacement Securities...................................... 31
SECTION 2.08. Outstanding Securities...................................... 32
SECTION 2.09. Treasury Securities......................................... 32
SECTION 2.10. Temporary Securities........................................ 33
SECTION 2.11. Cancellation................................................ 33
SECTION 2.12. Defaulted Interest.......................................... 33
SECTION 2.13. CUSIP Number................................................ 34
SECTION 2.14. Deposit of Moneys........................................... 34
SECTION 2.15. Book-Entry Provisions for Global Securities................. 34
SECTION 2.16. Registration of Transfers and Exchanges..................... 35
ARTICLE THREE
REDEMPTION
SECTION 3.01. Notices to Trustee.......................................... 40
SECTION 3.02. Selection of Securities To Be Redeemed...................... 41
SECTION 3.03. Notice of Redemption........................................ 41
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<PAGE> 5
SECTION 3.04. Effect of Notice of Redemption.............................. 42
SECTION 3.05. Deposit of Redemption Price................................. 42
SECTION 3.06. Securities Redeemed in Part................................. 43
ARTICLE FOUR
COVENANTS
SECTION 4.01. Payment of Securities....................................... 43
SECTION 4.02. Maintenance of Office or Agency............................. 43
SECTION 4.03. Limitation on Incurrence of Additional Indebtedness......... 44
SECTION 4.04. Limitation on Restricted Payments........................... 45
SECTION 4.05. Corporate Existence......................................... 46
SECTION 4.06. Payment of Taxes and Other Claims........................... 47
SECTION 4.07. Maintenance of Properties and Insurance..................... 47
SECTION 4.08. Compliance Certificate; Notice of Default................... 48
SECTION 4.09. Compliance with Laws........................................ 49
SECTION 4.10. SEC Reports................................................. 49
SECTION 4.11. Waiver of Stay, Extension or Usury Laws..................... 50
SECTION 4.12. Limitation on Asset Sales................................... 50
SECTION 4.13. Limitation on Dividend and Other Payment Restrictions
Affecting Restricted Subsidiaries....................... 53
SECTION 4.14. Limitation on Preferred Stock of Restricted
Subsidiaries............................................. 54
SECTION 4.15. Limitation on Liens......................................... 54
SECTION 4.16. [Intentionally Omitted]..................................... 55
SECTION 4.17. Prohibition on Incurrence of Senior Subordinated Debt....... 55
SECTION 4.18. Limitations on Transactions with Affiliates................. 55
SECTION 4.19. Issuance of Subsidiary Guarantees........................... 56
SECTION 4.20. [Intentionally Omitted]..................................... 57
SECTION 4.21. Conduct of Business......................................... 57
SECTION 4.22. Payments for Consent........................................ 57
SECTION 4.23. Limitation on Designations of Unrestricted
Subsidiaries............................................. 58
SECTION 4.24. Change of Control........................................... 59
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<PAGE> 6
ARTICLE FIVE
SUCCESSOR CORPORATION
SECTION 5.01. Mergers, Consolidations and Sales of Assets................. 61
SECTION 5.02. Successor Corporation Substituted........................... 63
ARTICLE SIX
DEFAULT AND REMEDIES
SECTION 6.01. Events of Default........................................... 64
SECTION 6.02. Acceleration................................................ 66
SECTION 6.03. Other Remedies.............................................. 67
SECTION 6.04. Waiver of Past Defaults..................................... 67
SECTION 6.05. Control by Majority......................................... 68
SECTION 6.06. Limitation on Suits......................................... 68
SECTION 6.07. Rights of Holders To Receive Payment........................ 69
SECTION 6.08. Collection Suit by Trustee.................................. 69
SECTION 6.09. Trustee May File Proofs of Claim............................ 69
SECTION 6.10. Priorities.................................................. 70
SECTION 6.11. Undertaking for Costs....................................... 70
ARTICLE SEVEN
TRUSTEE
SECTION 7.01. Duties of Trustee........................................... 71
SECTION 7.02. Rights of Trustee........................................... 72
SECTION 7.03. Individual Rights of Trustee................................ 74
SECTION 7.04. Trustee's Disclaimer........................................ 74
SECTION 7.05. Notice of Default........................................... 74
SECTION 7.06. Reports by Trustee to Holders............................... 75
SECTION 7.07. Compensation and Indemnity.................................. 75
SECTION 7.08. Replacement of Trustee...................................... 76
SECTION 7.09. Successor Trustee by Merger, Etc............................ 78
SECTION 7.10. Eligibility; Disqualification............................... 78
SECTION 7.11. Preferential Collection of Claims Against Company........... 78
ARTICLE EIGHT
SATISFACTION AND DISCHARGE OF INDENTURE
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<PAGE> 7
SECTION 8.01. Legal Defeasance and Covenant Defeasance.................... 78
SECTION 8.02. Satisfaction and Discharge.................................. 83
SECTION 8.03. Survival of Certain Obligations............................. 83
SECTION 8.04. Acknowledgment of Discharge by Trustee...................... 84
SECTION 8.05. Application of Trust Assets................................. 84
SECTION 8.06. Repayment to the Company or Guarantors; Unclaimed
Money.................................................... 84
SECTION 8.07. Reinstatement............................................... 85
ARTICLE NINE
AMENDMENTS, SUPPLEMENTS AND WAIVERS
SECTION 9.01. Without Consent of Holders.................................. 86
SECTION 9.02. With Consent of Holders..................................... 86
SECTION 9.03. Compliance with TIA......................................... 88
SECTION 9.04. Revocation and Effect of Consents........................... 88
SECTION 9.05. Notation on or Exchange of Securities....................... 89
SECTION 9.06. Trustee To Sign Amendments, Etc............................. 89
ARTICLE TEN
GUARANTEE
SECTION 10.01. Unconditional Guarantee..................................... 90
SECTION 10.02. Severability................................................ 91
SECTION 10.03. Release of a Guarantor...................................... 91
SECTION 10.04. Limitation of a Guarantor's Liability....................... 92
SECTION 10.05. Contribution................................................ 92
SECTION 10.06. Waiver of Subrogation....................................... 93
SECTION 10.07. Execution of Guarantees..................................... 93
SECTION 10.08. Waiver of Stay, Extension or Usury Laws..................... 94
ARTICLE ELEVEN
MISCELLANEOUS
SECTION 11.01. TIA Controls................................................ 94
SECTION 11.02. Notices..................................................... 94
SECTION 11.03. Communications by Holders with Other Holders................ 96
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<PAGE> 8
SECTION 11.04. Certificate and Opinion as to Conditions Precedent......... 96
SECTION 11.05. Statements Required in Certificate or Opinion.............. 96
SECTION 11.06. Rules by Trustee, Paying Agent, Registrar.................. 97
SECTION 11.07. Legal Holidays............................................. 97
SECTION 11.08. Governing Law.............................................. 97
SECTION 11.09. No Adverse Interpretation of Other Agreements.............. 97
SECTION 11.10. No Recourse Against Others................................. 97
SECTION 11.11. Successors................................................. 98
SECTION 11.12. Duplicate Originals........................................ 98
SECTION 11.13. Severability............................................... 98
SECTION 11.14. Table of Contents, Headings, Etc........................... 98
ARTICLE TWELVE
SUBORDINATION
SECTION 12.01. Securities Subordinated to Senior Debt; Guarantees
Subordinated to Guarantor Senior Debt................... 98
SECTION 12.02. No Payment on Securities in Certain Circumstances.......... 99
SECTION 12.03. Payment Over of Proceeds upon Dissolution, Etc............. 101
SECTION 12.04. Payments May Be Paid Prior to Dissolution.................. 103
SECTION 12.05. Subrogation................................................ 104
SECTION 12.06. Obligations of the Company Unconditional................... 104
SECTION 12.07. Notice to Trustee.......................................... 105
SECTION 12.08. Reliance on Judicial Order or Certificate of
Liquidating Agent....................................... 105
SECTION 12.09. Trustee's Relation to Senior Debt or Guarantor
Senior Debt............................................. 106
SECTION 12.10. Subordination Rights Not Impaired by Acts or
Omissions of the Company or a Guarantor or
Holders of Senior Debt.................................. 106
SECTION 12.11. Holders Authorize Trustee To Effectuate
Subordination of Securities............................. 107
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<PAGE> 9
SECTION 12.12. This Article Twelve Not To Prevent Events of Default....... 108
SECTION 12.13. Trustee's Compensation Not Prejudiced...................... 108
SIGNATURES ................................................................ S-1
Exhibit A - Form of Series A Security
Exhibit B - Form of Series B Security
Exhibit C - Form of Legend for Global Securities
Exhibit D - Transfer Certificate
Exhibit E - Transferee Certificate for Institutional Accredited Investors
Exhibit F - Transferee Certificate for Regulation S Transfers
Exhibit G - Form of Guarantee
Note: This Table of Contents shall not, for any purpose, be deemed to be a part
of the Indenture.
-vi-
<PAGE> 10
INDENTURE dated as of July 7, 1998, among SIMONDS INDUSTRIES
INC., a Delaware corporation (the "Company"), as Issuer, ARMSTRONG MANUFACTURING
COMPANY, an Oregon corporation, SIMONDS HOLDING COMPANY, INC., a Delaware
corporation, and SIMONDS INDUSTRIES FSC, INC., a U.S. Virgin Islands
corporation, as Guarantors, and State Street Bank and Trust Company, as Trustee
(the "Trustee").
The Company has duly authorized the issue of 10 1/4% Senior
Subordinated Notes due 2008, Series A, and 10 1/4% Senior Subordinated Notes due
2008, Series B, and to provide therefor, the Company has duly authorized the
execution and delivery of this Indenture. All things necessary to make the
Securities, when duly issued and executed by the Company and authenticated and
delivered hereunder, the valid and binding obligations of the Company, and to
make this Indenture a valid and binding agreement of the Company, have been
done.
Each party hereto agrees as follows for the benefit of each
other party and for the equal and ratable benefit of the Holders of the
Securities:
ARTICLE ONE
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.01. DEFINITIONS.
"Acquired Indebtedness" means Indebtedness of a Person or any
of its Subsidiaries existing at the time such Person becomes a Restricted
Subsidiary or at the time it merges or consolidates with the Company or any of
the Restricted Subsidiaries or assumed by the Company or any Restricted
Subsidiary in connection with the acquisition of assets from such Person and in
each case not incurred by such Person in connection with, or in anticipation or
contemplation of, such Person becoming a Restricted Subsidiary or such
acquisition, merger or consolidation.
<PAGE> 11
"Adjusted Net Assets" has the meaning provided in Section
10.05.
"Affiliate" means, with respect to any specified Person, any
other Person who directly or indirectly through one or more intermediaries
controls, or is controlled by, or is under common control with, such specified
Person. The term "control" means the possession, directly or indirectly, of the
power to direct or cause the direction of the management and policies of a
Person, whether through the ownership of voting securities, by contract or
otherwise; and the terms "controlling" and "controlled" have meanings
correlative of the foregoing.
"Affiliate Transaction" has the meaning provided in Section
4.18.
"Agent" means any Registrar, Paying Agent or co-Registrar.
"Asset Acquisition" means (a) an Investment by the Company or
any Restricted Subsidiary in any other Person pursuant to which such Person
shall become a Restricted Subsidiary, or shall be merged with or into the
Company or any Restricted Subsidiary, or (b) the acquisition by the Company or
any Restricted Subsidiary of the assets of any Person (other than a Restricted
Subsidiary) which constitute all or substantially all of the assets of such
Person or comprises any division or line of business of such Person or any other
properties or assets of such Person other than in the ordinary course of
business.
"Asset Sale" means any direct or indirect sale, issuance,
conveyance, lease (other than operating leases entered into in the ordinary
course of business), assignment or other transfer (other than the granting of a
Lien in accordance with Section 4.15 hereof) for value by the Company or any of
the Restricted Subsidiaries (including any Sale and Leaseback Transaction) to
any Person other than the Company or a Restricted Subsidiary of (a) any Capital
Stock of any Restricted Subsidiary; or (b) any other property or assets of
<PAGE> 12
the Company or any Restricted Subsidiary other than in the ordinary course of
business; PROVIDED, HOWEVER, that Asset Sales shall not include (i) a
transaction or series of related transactions for which the Company or the
Restricted Subsidiaries receive aggregate consideration of less than $1.0
million, (ii) the sale, lease, conveyance, disposition or other transfer of all
or substantially all of the assets of the Company as permitted by Article V
hereof, or (iii) any Restricted Payment made in accordance with Section 4.04
hereof.
"Bankruptcy Law" means Title 11, U.S. Code or any similar
Federal, state or foreign law for the relief of debtors.
"Blockage Period" has the meaning provided in Section 12.02.
"Board of Directors" means, as to any Person, the board of
directors of such Person or any duly authorized committee thereof.
"Board Resolution" means, with respect to any Person, a copy
of a resolution certified by the Secretary or an Assistant Secretary of such
Person to have been duly adopted by the Board of Directors of such Person and to
be in full force and effect on the date of such certification, and delivered to
the Trustee.
"Business Day" means any day other than a Saturday, Sunday or
any other day on which banking institutions in the City of New York are required
or authorized by law or other governmental action to be closed.
"Capitalized Lease Obligation" means, as to any Person, the
obligations of such Person under a lease that are required to be classified and
accounted for as capital lease obligations under GAAP and, for purposes of this
definition, the amount of such obligations at any date shall be the capitalized
amount of such obligations at such date, determined in accordance with GAAP.
<PAGE> 13
"Capital Stock" means (i) with respect to any Person that is a
corporation, any and all shares, interests, participations or other equivalents
(however designated and whether or not voting) of corporate stock, including
each class of Common Stock and Preferred Stock of such Person and (ii) with
respect to any Person that is not a corporation, any and all partnership or
other equity interests of such Person.
"Cash Equivalents" means (i) marketable direct obligations
issued by, or unconditionally guaranteed by, the United States Government or
issued by any agency thereof and backed by the full faith and credit of the
United States, in each case maturing within one year from the date of
acquisition thereof; (ii) marketable direct obligations issued by any state of
the United States of America or any political subdivision of any such state or
any public instrumentality thereof maturing within one year from the date of
acquisition thereof and, at the time of acquisition, having one of the two
highest ratings obtainable from either Standard & Poor's Corporation ("S&P") or
Moody's Investors Service, Inc. ("Moody's"); (iii) commercial paper maturing no
more than one year from the date of creation thereof and, at the time of
acquisition, having a rating of at least A-1 from S&P or at least P-1 from
Moody's; (iv) certificates of deposit or bankers' acceptances maturing within
one year from the date of acquisition thereof issued by any bank organized under
the laws of the United States of America or any state thereof or the District of
Columbia or any U.S. branch of a foreign bank having at the date of acquisition
thereof combined capital and surplus of not less than $250,000,000; (v)
repurchase obligations with a term of not more than seven days for underlying
securities of the types described in clause (i) above entered into with any bank
meeting the qualifications specified in clause (iv) above; and (vi) investments
in money market funds which invest substantially all their assets in securities
of the types described in clauses (i) through (v) above.
"Change of Control" means the occurrence of one or more of the
following events: (i) any sale, lease, exchange or other transfer (in one
transaction or a series of related transactions) of all or substantially all of
the assets of the
<PAGE> 14
Company to any Person or group of related Persons for purposes of Section 13(d)
of the Exchange Act (a "Group"), together with any Affiliates thereof (whether
or not otherwise in compliance with the provisions of this Indenture); (ii) the
approval by the holders of Capital Stock of the Company of any plan or proposal
for the liquidation or dissolution of the Company (whether or not otherwise in
compliance with the provisions of this Indenture); or (iii) any Person or Group
(other than the Permitted Holder(s)) shall become the beneficial owner, directly
or indirectly, of shares representing more than 50% of the aggregate ordinary
voting power represented by the issued and outstanding Capital Stock of the
Company.
"Change of Control Offer" has the meaning provided in Section
4.24.
"Change of Control Payment Date" has the meaning provided in
Section 4.24.
"Commission" means the Securities and Exchange Commission, as
from time to time constituted, or if at any time after the execution of this
Indenture such Commission is not existing and performing the applicable duties
now assigned to it, then the body or bodies performing such duties at such time.
"Common Stock" of any Person means any and all shares,
interests or other participations in, and other equivalents (however designated
and whether voting or non-voting) of such Person's common stock, whether
outstanding on the Issue Date or issued after the Issue Date, and includes,
without limitation, all series and classes of such common stock.
"Company" means the party named as such in this Indenture
until a successor replaces it pursuant to this Indenture and thereafter means
such successor.
"Consolidated EBITDA" means, with respect to the Company, for
any period, the sum (without duplication) of (i) Consolidated Net Income and
(ii) to the extent Consolidated
<PAGE> 15
Net Income has been reduced thereby, (A) all income taxes of the Company and the
Restricted Subsidiaries paid or accrued in accordance with GAAP for such period
(other than income taxes attributable to extraordinary or nonrecurring gains or
taxes attributable to Asset Sales outside the ordinary course of business), (B)
Consolidated Interest Expense and (C) Consolidated Non-cash Charges, LESS any
non-cash items increasing Consolidated Net Income for such period, all as
determined on a consolidated basis for the Company and the Restricted
Subsidiaries in accordance with GAAP.
"Consolidated Fixed Charge Coverage Ratio" means, with respect
to the Company, the ratio of Consolidated EBITDA of the Company during the four
full fiscal quarters (the "Four Quarter Period") ending on or prior to the date
of the transaction giving rise to the need to calculate the Consolidated Fixed
Charge Coverage Ratio (the "Transaction Date") to Consolidated Fixed Charges of
the Company for the Four Quarter Period. In addition to and without limitation
of the foregoing, for purposes of this definition, "Consolidated EBITDA" and
"Consolidated Fixed Charges" shall be calculated after giving effect on a PRO
FORMA basis for the period of such calculation to (i) the incurrence or
repayment of any Indebtedness of the Company or any of the Restricted
Subsidiaries (and the application of the proceeds thereof) giving rise to the
need to make such calculation and any incurrence or repayment of other
Indebtedness (and the application of the proceeds thereof), other than the
incurrence or repayment of Indebtedness in the ordinary course of business for
working capital purposes pursuant to working capital facilities, occurring
during the Four Quarter Period or at any time subsequent to the last day of the
Four Quarter Period and on or prior to the Transaction Date, as if such
incurrence or repayment, as the case may be (and the application of the proceeds
thereof), occurred on the first day of the Four Quarter period and (ii) any
Asset Sales or other dispositions or Asset Acquisitions (including, without
limitation, any Asset Acquisition giving rise to the need to make such
calculation as a result of the Company or one of the Restricted Subsidiaries
(including any person who becomes a Restricted Subsidiary as a
<PAGE> 16
result of the Asset Acquisition) incurring, assuming or otherwise being liable
for Acquired Indebtedness and also including any Consolidated EBITDA (PROVIDED
that such Consolidated EBITDA shall be included only to the extent includable
pursuant to the definition of "Consolidated Net Income") attributable to the
assets which are the subject of the Asset Acquisition or Asset Sale or other
disposition during the Four Quarter Period) occurring during the Four Quarter
Period or at any time subsequent to the last day of the Four Quarter Period and
on or prior to the Transaction Date as if such Asset Sale or other disposition
or Asset Acquisition (including the incurrence, assumption or liability for any
such Acquired Indebtedness) occurred on the first day of the Four Quarter
Period. If the Company or any of the Restricted Subsidiaries directly or
indirectly guarantees Indebtedness of a third Person, the preceding sentence
shall give effect to the incurrence of such guaranteed Indebtedness as if the
Company or any Restricted Subsidiary had directly incurred or otherwise assumed
such guaranteed Indebtedness. Furthermore, in calculating "Consolidated Fixed
Charges" for purposes of determining the denominator (but not the numerator) of
this "Consolidated Fixed Charge Coverage Ratio," (1) interest on outstanding
Indebtedness determined on a fluctuating basis as of the Transaction Date and
which will continue to be so determined thereafter shall be deemed to have
accrued at a fixed rate per annum equal to the rate of interest on such
Indebtedness in effect on the Transaction Date; (2) if interest on any
Indebtedness actually incurred on the Transaction Date may optionally be
determined at an interest rate based upon a factor of a prime or similar rate, a
eurocurrency interbank offered rate, or other rates, then the interest rate in
effect on the Transaction Date will be deemed to have been in effect during the
Four Quarter Period; and (3) notwithstanding clause (1) above, interest on
Indebtedness determined on a fluctuating basis, to the extent such interest is
covered by agreements relating to Interest Swap Obligations, shall be deemed to
accrue at the rate per annum resulting after giving effect to the operation of
such agreements.
<PAGE> 17
"Consolidated Fixed Charges" means, with respect to the
Company for any period, the sum, without duplication, of (i) Consolidated
Interest Expense, plus (ii) the product of (x) the amount of all dividend
payments on any series of Preferred Stock of the Company (other than dividends
paid in Qualified Capital Stock) paid, accrued or scheduled to be paid or
accrued during such period times (y) a fraction, the numerator of which is one
and the denominator of which is one minus the then current effective
consolidated federal, state and local income tax rate of the Company, expressed
as a decimal.
"Consolidated Interest Expense" means, with respect to the
Company for any period, the sum of, without duplication: (i) the aggregate of
the interest expense of the Company and the Restricted Subsidiaries for such
period determined on a consolidated basis in accordance with GAAP, including
without limitation, (a) any amortization of debt discount (other than any such
amortization relating to Indebtedness repaid on the Issue Date), (b) the net
costs under Interest Swap Obligations, (c) all capitalized interest and (d) the
interest portion of any deferred payment obligation; and (ii) the interest
component of Capitalized Lease Obligations paid, accrued and/or scheduled to be
paid or accrued by the Company and the Restricted Subsidiaries during such
period as determined on a consolidated basis in accordance with GAAP.
"Consolidated Net Income" means, with respect to the Company,
for any period, the aggregate net income (or loss) of the Company and the
Restricted Subsidiaries for such period on a consolidated basis, determined in
accordance with GAAP; PROVIDED that there shall be excluded therefrom (a)
after-tax gains and losses from Asset Sales or abandonments or reserves relating
thereto, (b) extraordinary or nonrecurring gains or losses, (c) the net income
of any Person acquired in a "pooling of interests" transaction accrued prior to
the date it becomes a Restricted Subsidiary or is merged or consolidated with
the Company or any Restricted Subsidiary, (d) the net income (but not loss) of
any Restricted Subsidiary to the extent that the declaration of dividends or
similar distributions by that Restricted Subsidiary of that income is restricted
by a
<PAGE> 18
contract, operation of law or otherwise, (e) the net income of any Person, other
than a Restricted Subsidiary, except to the extent of cash dividends or
distributions paid to the Company or to a Restricted Subsidiary by such Person,
(f) any restoration to income of any contingency reserve, except to the extent
that provision for such reserve was made out of Consolidated Net Income accrued
at any time following the Issue Date or any such restorations which do not
exceed $500,000 in the aggregate in any four fiscal quarter period, (g) income
or loss attributable to discontinued operations (including, without limitation,
operations disposed of during such period whether or not such operations were
classified as discontinued) and (h) in the case of a successor to the Company by
consolidation or merger or as a transferee of the Company's assets, any earnings
of the successor corporation prior to such consolidation, merger or transfer of
assets.
"Consolidated Non-cash Charges" means, with respect to the
Company, for any period, the aggregate depreciation, amortization and other
non-cash expenses of the Company and the Restricted Subsidiaries reducing
Consolidated Net Income of the Company for such period, determined on a
consolidated basis in accordance with GAAP (excluding any such charge which
requires an accrual of or a reserve for cash charges for any future period).
"Covenant Defeasance" has the meaning provided in Section
8.01.
"Credit Agreement" means the Credit Agreement dated as of the
Issue Date, among the Company, the Guarantors, the lenders party thereto in
their capacities as lenders thereunder and First Union National Bank, as agent,
together with the related documents thereto (including, without limitation, any
guarantee agreements and security documents), in each case as such agreements
may be amended (including any amendment and restatement thereof), supplemented
or otherwise modified from time to time, including any agreement extending the
maturity of, refinancing, replacing or otherwise restructuring (including
increasing the amount of available borrowings thereunder (PROVIDED that such
increase in borrowings is
<PAGE> 19
permitted by Section 4.03 hereof (including the definition of Permitted
Indebtedness)) or adding Restricted Subsidiaries as additional borrowers or
guarantors thereunder) all or any portion of the Indebtedness under such
agreement or any successor or replacement agreement and whether by the same or
any other agent, lender or group of lenders.
"Currency Agreement" means any foreign exchange contract,
currency swap agreement or other similar agreement or arrangement designed to
protect the Company or any Restricted Subsidiary against fluctuations in
currency values.
"Custodian" means any receiver, trustee, assignee, liquidator,
sequestrator or similar official under any Bankruptcy Law.
"Default" means an event or condition the occurrence of which
is, or with the lapse of time or the giving of notice or both would be, an Event
of Default.
"Default Notice" has the meaning provided in Section 12.02.
"Depository" means, with respect to the Securities issued in
the form of one or more Global Securities, The Depository Trust Company or
another Person designated as Depository by the Company, which must be a clearing
agency registered under the Exchange Act.
"Designated Senior Debt" means (i) Indebtedness under or in
respect of the Credit Agreement and (ii) any other Indebtedness constituting
Senior Debt which, at the time of determination, has an aggregate principal
amount of at least $10,000,000 and is specifically designated in the instrument
evidencing such Senior Debt as "Designated Senior Debt" by the Company.
"Designation" has the meaning provided in Section 4.23.
"Designation Amount" has the meaning provided in Section 4.23.
<PAGE> 20
"Disqualified Capital Stock" means that portion of any Capital
Stock which, by its terms (or by the terms of any security into which it is
convertible or for which it is exchangeable), or upon the happening of any
event, matures or is mandatorily redeemable, pursuant to a sinking fund
obligation or otherwise, or is mandatorily exchangeable for Indebtedness, or is
redeemable, or exchangeable for Indebtedness, at the sole option of the holder
thereof on or prior to the final maturity date of the Securities.
"Domestic Wholly Owned Restricted Subsidiary" means a Wholly
Owned Restricted Subsidiary incorporated or otherwise organized or existing
under the laws of the United States, any State thereof, the District of Columbia
or any territory or possession of the United States.
"Event of Default" has the meaning provided in Section 6.01.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, or any successor statute or statutes thereto, and the rules and
regulations of the Commission promulgated thereunder.
"Fair market value" means, with respect to any asset or
property, the price which could be negotiated in an arm's-length, free market
transaction, for cash, between a willing seller and a willing and able buyer,
neither of whom is under undue pressure or compulsion to complete the
transaction. Fair market value shall be determined by the Board of Directors of
the Company acting reasonably and in good faith and shall be evidenced by a
Board Resolution of the Board of Directors of the Company delivered to the
Trustee.
"Final Maturity Date" means July 1, 2008.
"Foreign Restricted Subsidiary" means any Restricted
Subsidiary that is organized or existing under the laws of any jurisdiction
other than the United States, any State thereof, the District of Columbia or any
territory or possession of the United States.
<PAGE> 21
"Four Quarter Period" has the meaning provided in the
definition of "Consolidated Fixed Charge Coverage Ratio" above.
"Funding Guarantor" has the meaning provided in Section 10.05.
"GAAP" means generally accepted accounting principles set
forth in the opinions and pronouncements of the Accounting Principles Board of
the American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board or in such other
statements by such other entity as may be approved by a significant segment of
the accounting profession of the United States, which are in effect as of the
Issue Date.
"Global Security" means a security evidencing all or a part of
the Securities issued to the Depository in accordance with Section 2.01 and
bearing the legend prescribed in EXHIBIT C.
"Guarantee" has the meaning provided in Section 4.19.
"Guarantor" means (i) each Domestic Wholly Owned Restricted
Subsidiary of the Company as of the Issue Date and (ii) each other Person that
in the future executes a Guarantee pursuant to Section 4.19 hereof or otherwise;
PROVIDED that any Person constituting a Guarantor as described above shall cease
to constitute a Guarantor when its Guarantee is released in accordance with the
terms of this Indenture.
"Guarantor Senior Debt" means, with respect to any Guarantor,
(i) the principal of, premium, if any, and interest (including any interest
accruing subsequent to the filing of a petition of bankruptcy at the rate
provided for in the documentation with respect thereto, whether or not such
interest is an allowed claim under applicable law) on any Indebtedness of such
Guarantor, whether outstanding on the Issue Date or thereafter created, incurred
or assumed, unless, in the case of any particular Indebtedness, the instrument
creating or evidencing the same or pursuant to which the same is outstanding
expressly provides that such Indebtedness shall
<PAGE> 22
not be senior in right of payment to the Guarantee of such Guarantor. Without
limiting the generality of the foregoing, "Guarantor Senior Debt" shall also
include the principal of, premium, if any, interest (including any interest
accruing subsequent to the filing of a petition of bankruptcy at the rate
provided for in the documentation with respect thereto, whether or not such
interest is an allowed claim under applicable law) on, and all other amounts
owing in respect of, (x) all monetary obligations of every nature of the Company
or any Guarantor with respect to the Credit Agreement, including, without
limitation, obligations to pay principal and interest, reimbursement obligations
under letters of credit, fees, expenses and indemnities, (y) all Interest Swap
Obligations and (z) all obligations under Currency Agreements, in each case
whether outstanding on the Issue Date or thereafter incurred. Notwithstanding
the foregoing, "Guarantor Senior Debt" shall not include (i) any Indebtedness of
such Guarantor owing to a Subsidiary of such Guarantor or any Affiliate of such
Guarantor or any of such Affiliate's Subsidiaries, (ii) Indebtedness to, or
guaranteed on behalf of, any shareholder, director, officer or employee of such
Guarantor or any Subsidiary of such Guarantor (including, without limitation,
amounts owed for compensation), (iii) Indebtedness to trade creditors and other
amounts incurred in connection with obtaining goods, materials or services, (iv)
Indebtedness represented by Disqualified Capital Stock, (v) any liability for
federal, state, local or other taxes owed or owing by such Guarantor, (vi)
Indebtedness incurred in violation Section 4.03 hereof, (vii) Indebtedness
which, when incurred and without respect to any election under Section 1111(b)
of Title 11, United States Code, is without recourse to such Guarantor and
(viii) any Indebtedness which is, by its express terms, subordinated in right of
payment to any other Indebtedness of such Guarantor.
"Holder" or "Securityholder" means a Person in whose name a
Security is registered on the Registrar's books.
"incur" has the meaning provided in Section 4.03.
"Indebtedness" means, with respect to any Person, without
duplication, (i) all Obligations of such Person for
<PAGE> 23
borrowed money, (ii) all Obligations of such Person evidenced by bonds,
debentures, notes or other similar instruments, (iii) all Capitalized Lease
Obligations of such Person, (iv) all Obligations of such Person issued or
assumed as the deferred purchase price of property, all conditional sale
obligations and all Obligations under any title retention agreement (but
excluding trade accounts payable and other accrued liabilities arising in the
ordinary course of business that are not overdue by 90 days or more or are being
contested in good faith by appropriate proceedings promptly instituted and
diligently conducted), (v) all Obligations for the reimbursement of any obligor
on any letter of credit, banker's acceptance or similar credit transaction, (vi)
guarantees and other contingent obligations in respect of Indebtedness of any
other Person referred to in clauses (i) through (v) above and clause (viii)
below, (vii) all Obligations of any other Person of the type referred to in
clauses (i) through (vi) which are secured by any Lien on any property or asset
of such Person, the amount of such Obligation being deemed to be the lesser of
the fair market value of such property or asset or the amount of the Obligation
so secured, (viii) all Obligations under currency agreements and interest swap
agreements of such Person and (ix) all Disqualified Capital Stock issued by such
Person with the amount of Indebtedness represented by such Disqualified Capital
Stock being equal to the greater of its voluntary or involuntary liquidation
preference and its maximum fixed repurchase price, but excluding accrued
dividends, if any. For purposes hereof, the "maximum fixed repurchase price" of
any Disqualified Capital Stock which does not have a fixed repurchase price
shall be calculated in accordance with the terms of such Disqualified Capital
Stock as if such Disqualified Capital Stock were purchased on any date on which
Indebtedness shall be required to be determined pursuant to this Indenture, and
if such price is based upon, or measured by, the fair market value of such
Disqualified Capital Stock, such fair market value shall be determined
reasonably and in good faith by the Board of Directors of the issuer of such
Disqualified Capital Stock.
<PAGE> 24
"Indenture" means this Indenture, as amended or supplemented
from time to time in accordance with the terms hereof.
"Independent" when used with respect to any specified Person
means such a Person who (a) is in fact independent; (b) does not have any direct
financial interest or any material indirect financial interest in the Company or
any of its Subsidiaries, or in any Affiliate of the Company or any of its
Subsidiaries; and (c) is not an officer, employee, promoter, underwriter,
trustee, partner, director or Person performing similar functions for the
Company or any of its Subsidiaries. Whenever it is provided in this Indenture
that any Independent Person's opinion or certificate shall be furnished to the
Trustee, such Person shall be appointed by the Company, and such opinion or
certificate shall state that the signer has read this definition and that the
signer is Independent within the meaning hereof.
"Independent Financial Advisor" means a firm (i) which does
not, and whose directors, officers and employees and Affiliates do not, have a
direct or indirect financial interest in the Company and (ii) which, in the
judgment of the Board of Directors of the Company, is otherwise independent and
qualified to perform the task for which it is to be engaged.
"Initial Purchasers" means Salomon Brothers Inc, First Union
Capital Markets, a division of Wheat First Securities, Inc., and Schroder & Co.
Inc.
"Institutional Accredited Investor" means an institution that
is an "accredited investor" as that term is defined in Rule 501(a)(1), (2), (3)
or (7) under the Securities Act.
"Interest Payment Date" means the stated maturity of an
installment of interest on the Securities.
"Interest Swap Obligations" means the obligations of any
Person pursuant to any arrangement with any other Person, whereby, directly or
indirectly, such Person is entitled to
<PAGE> 25
receive from time to time periodic payments calculated by applying either a
floating or a fixed rate of interest on a stated notional amount in exchange for
periodic payments made by such other Person calculated by applying a fixed or a
floating rate of interest on the same notional amount and shall include, without
limitation, interest rate swaps, caps, floors, collars and similar agreements.
"Investment" means, with respect to any Person, (i) any direct
or indirect loan or other extension of credit (including, without limitation, a
guarantee) or capital contribution to (by means of any transfer of cash or other
property to others or any payment for property or services for the account or
use of others), or (ii) any purchase or acquisition by such Person of any
Capital Stock, bonds, notes, debentures or other securities or evidences of
Indebtedness issued by, any Person. "Investment" shall exclude extensions of
trade credit by the Company and the Restricted Subsidiaries on commercially
reasonable terms in accordance with normal trade practices of the Company or
such Restricted Subsidiary, as the case may be. If the Company or any Restricted
Subsidiary sells or otherwise disposes of any Capital Stock of any Restricted
Subsidiary (the "Referent Subsidiary") such that, after giving effect to any
such sale or disposition the Referent Subsidiary shall cease to be a Restricted
Subsidiary, the Company shall be deemed to have made an Investment on the date
of any such sale or disposition equal to the fair market value of the Capital
Stock of the Referent Subsidiary not sold or disposed of.
"Issue Date" means the date of original issuance of the
Securities.
"Legal Defeasance" has the meaning provided in Section 8.01.
"Lien" means any lien, mortgage, deed of trust, pledge,
security interest, charge or encumbrance of any kind (including any conditional
sale or other title retention agreement, any lease in the nature thereof and any
agreement to give any security interest).
<PAGE> 26
"Net Cash Proceeds" means, with respect to any Asset Sale, the
proceeds in the form of cash or Cash Equivalents, including payments in respect
of deferred payment obligations when received in the form of cash or Cash
Equivalents (other than the portion of any such deferred payment constituting
interest), received by the Company or any of the Restricted Subsidiaries from
such Asset Sale net of (a) reasonable out-of-pocket expenses and fees relating
to such Asset Sale (including, without limitation, legal, accounting and
investment banking fees, sales commissions and relocation expenses), (b) taxes
paid or payable after taking into account any reduction in consolidated tax
liability due to available tax credits or deductions and any tax sharing
arrangements, (c) repayments of Indebtedness secured by the property or assets
subject to such Asset Sale that is required to be repaid in connection with such
Asset Sale and (d) appropriate amounts to be determined by the Company or any
Restricted Subsidiary, as the case may be, as a reserve, in accordance with
GAAP, against any liabilities associated with such Asset Sale and retained by
the Company or any Restricted Subsidiary, as the case may be, after such Asset
Sale, including, without limitation, pension and other post-employment benefit
liabilities, liabilities related to environmental matters and liabilities under
any indemnification obligations associated with such Asset Sale.
"Net Proceeds Offer" has the meaning provided in Section 4.12.
"Net Proceeds Offer Amount" has the meaning provided in
Section 4.12.
"Net Proceeds Offer Payment Date" has the meaning provided in
Section 4.12.
"Net Proceeds Offer Trigger Date" has the meaning provided in
Section 4.12.
"Obligations" means all obligations for principal, premium,
interest, penalties, fees, indemnifications,
<PAGE> 27
reimbursements, damages and other liabilities payable under the documentation
governing any Indebtedness.
"Officer" means, with respect to any Person, the Chairman of
the Board, the Chief Executive Officer, the President, any Vice President, the
Chief Financial Officer, the Controller, or the Secretary of such Person.
"Officers' Certificate" means a certificate signed by two
Officers of the Company.
"Opinion of Counsel" means a written opinion from legal
counsel which and who are acceptable to the Trustee.
"Participants" has the meaning provided in Section 2.15.
"Paying Agent" has the meaning provided in Section 2.03.
"Permitted Holders" means (i) Fleet Venture Resources, Inc.,
Fleet Equity Partners VI-B, L.P., Chisholm Partners III, L.P., Kennedy Plaza
Partners, Habib Y. Gorgi, Bernard V. Buonanno III, Ross B. George and Joseph L.
Sylvia and (ii) any Person "controlled" (as defined in the definition of
"Affiliate") by one or more Persons identified in clause (i) of this definition.
"Permitted Indebtedness" means, without duplication, each of
the following:
(i) Indebtedness under the Securities, this Indenture and any
Guarantees not to exceed $100,000,000 in aggregate principal amount;
(ii) Indebtedness incurred pursuant to the Credit Agreement in an
aggregate principal amount at any time outstanding not to exceed the
greater of (x) $30.0 million and (y) the sum of (A) 85% of the net book
value of the accounts receivable of the Company and the Restricted
Subsidiaries and (B) 50% of the net book value of the inventory of the
Company and the Restricted Subsidiaries
<PAGE> 28
LESS (C) the amount of Indebtedness outstanding pursuant to clause
(xiii) of this definition reduced in the case of (x) by any required
permanent repayments with the proceeds of Asset Sales (which are
accompanied by a corresponding permanent commitment reduction)
thereunder;
(iii) other Indebtedness of the Company and the Restricted
Subsidiaries outstanding on the Issue Date reduced by the amount of any
scheduled amortization payments or mandatory prepayments when actually
paid or permanent reductions thereon;
(iv) Interest Swap Obligations of the Company covering Indebtedness
of the Company or any Guarantor and Interest Swap Obligations of any
Restricted Subsidiary covering Indebtedness of such Restricted
Subsidiary; PROVIDED, HOWEVER, that such Interest Swap Obligations are
entered into to protect the Company and the Restricted Subsidiaries
from fluctuations in interest rates on Indebtedness incurred in
accordance with this Indenture to the extent the notional principal
amount of such Interest Swap Obligations does not exceed the principal
amount of the Indebtedness to which such Interest Swap Obligations
relates;
(v) Indebtedness under Currency Agreements; PROVIDED that in the
case of Currency Agreements which relate to Indebtedness, such Currency
Agreements do not increase the Indebtedness of the Company and the
Restricted Subsidiaries outstanding other than as a result of
fluctuations in foreign currency exchange rates or by reason of fees,
indemnities and compensation payable thereunder;
(vi) Indebtedness of a Restricted Subsidiary to the Company or a
Restricted Subsidiary for so long as such Indebtedness is held by the
Company or a Restricted Subsidiary, in each case subject to no Lien
held by a Person other than the Company or a Restricted Subsidiary;
PROVIDED that if as of any date any Person other than the Company or an
a Restricted Subsidiary owns or holds any
<PAGE> 29
such Indebtedness or holds a Lien in respect of such Indebtedness, such
date shall be deemed the incurrence of Indebtedness not constituting
Permitted Indebtedness by the issuer of such Indebtedness;
(vii) Indebtedness of the Company to a Restricted Subsidiary for so
long as such Indebtedness is held by a Restricted Subsidiary, in each
case subject to no Lien; PROVIDED that (a) any Indebtedness of the
Company to any Restricted Subsidiary is unsecured and (b) if as of any
date any person other than a Restricted Subsidiary owns or holds any
such Indebtedness or any Person holds a Lien in respect of such
Indebtedness, such date shall be deemed the incurrence of Indebtedness
not constituting Permitted Indebtedness by the Company;
(viii) Indebtedness arising from the honoring by a bank or other
financial institution of a check, draft or similar instrument
inadvertently (except in the case of daylight overdrafts) drawn against
insufficient funds in the ordinary course of business; PROVIDED,
HOWEVER, that such Indebtedness is extinguished within five business
days of incurrence;
(ix) Indebtedness of the Company or any of the Restricted
Subsidiaries represented by letters of credit for the account of the
Company or such Restricted Subsidiary, as the case may be, in order to
provide security for workers' compensation claims, payment obligations
in connection with self-insurance or similar requirements in the
ordinary course of business;
(x) Refinancing Indebtedness;
(xi) additional Indebtedness of the Company and the Guarantors in
an aggregate principal amount not to exceed $10.0 million at any one
time outstanding;
(xii) Purchase Money Indebtedness and Capitalized Lease Obligations
(and any Indebtedness incurred to Refinance such Purchase Money
Indebtedness or Capitalized
<PAGE> 30
Lease Obligations) not to exceed $10.0 million at any one time
outstanding; and
(xiii) Indebtedness of Foreign Restricted Subsidiaries that are not
Guarantors in an aggregate principal amount at any one time outstanding
not to exceed the greater of (a) $25.0 million or (b) the sum of (x)
85% of the net book value of accounts receivable of the Foreign
Restricted Subsidiaries that are not Guarantors and (y) 50% of the net
book value of the inventory of the Foreign Restricted Subsidiaries that
are not Guarantors.
"Permitted Investments" means (i) Investments by the Company
or any Restricted Subsidiary in any Person that is or will become immediately
after such Investment a Restricted Subsidiary or that will merge or consolidate
into the Company or a Restricted Subsidiary; (ii) investments in the Company by
any Restricted Subsidiary; PROVIDED that any Indebtedness evidencing such
Investment is unsecured; (iii) investments in cash and Cash Equivalents; (iv)
loans and advances to employees, officers and directors of the Company and the
Restricted Subsidiaries in the ordinary course of business for bona fide
business purposes not in excess of $1.0 million at any time outstanding; (v)
Currency Agreements and Interest Swap Obligations entered into in the ordinary
course of the Company's or a Restricted Subsidiary's businesses and otherwise in
compliance with this Indenture; (vi) Investments in securities of trade
creditors or customers received pursuant to any plan of reorganization or
similar arrangement upon the bankruptcy or insolvency of such trade creditors or
customers; (vii) Investments made by the Company or the Restricted Subsidiaries
as a result of consideration received in connection with an Asset Sale made in
compliance with Section 4.12 hereof; (viii) Investments in Persons, including,
without limitation, Unrestricted Subsidiaries and joint ventures, engaged in a
business similar or related to the businesses in which the Company and the
Restricted Subsidiaries are engaged on the Issue Date not to exceed $10.0
million at any one time outstanding; and (ix) Investments in the Notes.
<PAGE> 31
"Permitted Liens" means the following types of Liens:
(i) Liens for taxes, assessments or governmental charges or claims
either (a) not delinquent or (b) contested in good faith by appropriate
proceedings and as to which the Company or any Restricted Subsidiary
shall have set aside on its books such reserves as may be required
pursuant to GAAP;
(ii) statutory Liens of landlords and Liens of carriers,
warehousemen, mechanics, suppliers, materialmen, repairmen and other
Liens imposed by law incurred in the ordinary course of business for
sums not yet delinquent or being contested in good faith, if such
reserve or other appropriate provision, if any, as shall be required by
GAAP shall have been made in respect thereof;
(iii) Liens incurred or deposits made in the ordinary course of
business in connection with workers' compensation, unemployment
insurance and other types of social security, including any Lien
securing letters of credit issued in the ordinary course of business
consistent with past practice in connection therewith, or to secure the
performance of tenders, statutory obligations, surety and appeal bonds,
bids, leases, government contracts, performance and return-of-money
bonds and other similar obligations (exclusive of obligations for the
payment of borrowed money);
(iv) judgment Liens not giving rise to an Event of Default so long
as such Lien is adequately bonded and any appropriate legal proceedings
which may have been duly initiated for the review of such judgment
shall not have been finally terminated or the period within which such
proceedings may be initiated shall not have expired;
(v) easements, rights-of-way, zoning restrictions and other
similar charges or encumbrances in respect of real property not
impairing in any material respect the ordinary conduct of the business
of the Company or any of the Restricted Subsidiaries;
<PAGE> 32
(vi) any interest or title of a lessor under any Capitalized Lease
Obligation; PROVIDED that such Liens do not extend to any property or
assets which is not leased property subject to such Capitalized Lease
Obligation;
(vii) purchase money Liens securing Indebtedness incurred to finance
property or assets of the Company or any Restricted Subsidiary acquired
in the ordinary course of business, and Liens securing Indebtedness
which Refinances any such Indebtedness; PROVIDED, HOWEVER, that (A) the
related purchase money Indebtedness (or Refinancing Indebtedness) shall
not exceed the cost of such property or assets and shall not be secured
by any property or assets of the Company or any Restricted Subsidiary
other than the property and assets so acquired and (B) the Lien
securing the purchase money Indebtedness shall be created within 90
days of such acquisition;
(viii) Liens upon specific items of inventory or other goods and
proceeds of any Person securing such Person's obligations in respect of
bankers' acceptances issued or created for the account of such Person
to facilitate the purchase, shipment or storage of such inventory or
other goods;
(ix) Liens securing reimbursement obligations with respect to
commercial letters of credit which encumber documents and other
property relating to such letters of credit and products and proceeds
thereof;
(x) Liens encumbering deposits made to secure obligations arising
from statutory, regulatory, contractual or warranty requirements of the
Company or any of the Restricted Subsidiaries, including rights of
offset and set-off;
(xi) Liens securing Interest Swap Obligations which Interest Swap
Obligations relate to Indebtedness that is otherwise permitted under
this Indenture;
<PAGE> 33
(xii) Liens securing Indebtedness under Currency Agreements;
(xiii) Liens securing Acquired Indebtedness (and any Indebtedness
which Refinances such Acquired Indebtedness) incurred in accordance
with Section 4.03; PROVIDED that (A) such Liens secured the Acquired
Indebtedness at the time of and prior to the incurrence of such
Acquired Indebtedness by the Company or a Restricted Subsidiary and
were not granted in connection with, or in anticipation of the
incurrence of such Acquired Indebtedness by the Company or a Restricted
Subsidiary and (B) such Liens do not extend to or cover any property or
assets of the Company or of any of the Restricted Subsidiaries other
than the property or assets that secured the Acquired Indebtedness
prior to the time such Indebtedness became Acquired Indebtedness of the
Company or a Restricted Subsidiary; and
(xiv) Liens securing Indebtedness of Foreign Restricted Subsidiaries
that are not Guarantors incurred in accordance with this Indenture;
PROVIDED that such Liens do not extend to any property or assets other
than property or assets of Foreign Restricted Subsidiaries that are not
Guarantors.
"Person" means an individual, partnership, corporation,
unincorporated organization, trust or joint venture, or a governmental agency or
political subdivision thereof.
"Physical Securities" has the meaning provided in Section
2.01.
"Preferred Stock" of any Person means any Capital Stock of
such Person that has preferential rights to any other Capital Stock of such
Person with respect to dividends or redemptions or upon liquidation.
"Private Placement Legend" means the legend initially set
forth on the Securities in the form set forth on EXHIBIT A.
<PAGE> 34
"pro forma" means, with respect to any calculation made or
required to be made pursuant to the terms of this Indenture, a calculation in
accordance with Article 11 of Regulation S-X under the Securities Act as
interpreted by the Company's Board of Directors in consultation with its
independent certified public accountants.
"Public Equity Offering" has the meaning provided in Paragraph
6 of the Securities.
"Purchase Agreement" means the purchase agreement dated as of
June 30, 1998 by and among the Company, the Guarantors and the Initial
Purchasers.
"Purchase Money Indebtedness" means Indebtedness of the
Company or any Restricted Subsidiary incurred for the purpose of financing all
or any part of the purchase price or the cost of construction or improvement of
any property, PROVIDED that the aggregate principal amount of such Indebtedness
does not exceed the lesser of the fair market value of such property or such
purchase price or cost.
"Qualified Capital Stock" means any Capital Stock that is not
Disqualified Capital Stock.
"Qualified Institutional Buyer" or "QIB" shall have the
meaning specified in Rule 144A under the Securities Act.
"Record Date" means the Record Dates specified in the
Securities; PROVIDED that if any such date is not a Business Day, the Record
Date shall be the first day immediately preceding such specified day that is a
Business Day.
"Redemption Date," when used with respect to any Security to
be redeemed, means the date fixed for such redemption pursuant to this Indenture
and the Securities.
"Redemption Price," when used with respect to any Security to
be redeemed, means the price fixed for such redemption, payable in immediately
available funds, pursuant to this Indenture and the Securities.
<PAGE> 35
"Reference Date" has the meaning provided in Section 4.04.
"Refinance" means in respect of any security or Indebtedness,
to refinance, extend, renew, refund, repay, prepay, redeem, defease or retire,
or to issue a security or Indebtedness in exchange or replacement for, such
security or Indebtedness in whole or in part. "Refinanced" and "Refinancing"
shall have correlative meanings.
"Refinancing Indebtedness" means any Refinancing by the
Company or any Restricted Subsidiary of Indebtedness incurred in accordance with
Section 4.03 hereof (other than pursuant to clause (ii), (iv), (v), (vi), (vii),
(viii), (ix), (xi), (xii) or (xiii) of the definition of Permitted
Indebtedness), in each case that does not (1) result in an increase in the
aggregate principal amount of any Indebtedness of such Person as of the date of
such proposed Refinancing (plus the amount of any premium reasonably necessary
to Refinance such Indebtedness and plus the amount of reasonable expenses
incurred by the Company in connection with such Refinancing) or (2) create
Indebtedness with (A) a Weighted Average Life to Maturity that is less than the
Weighted Average Life to Maturity of the Indebtedness being Refinanced or (B) a
final maturity earlier than the final maturity of the Indebtedness being
Refinanced; PROVIDED that if such Indebtedness being Refinanced is Indebtedness
of the Company or a Guarantor, then such Refinancing Indebtedness shall be
Indebtedness solely of the Company and/or Guarantors.
"Registrar" has the meaning provided in Section 2.03.
"Registration Rights Agreement" means the Registration Rights
Agreement dated as of the Issue Date among the Company, the Guarantors and the
Initial Purchasers.
"Regulation S" means Regulation S under the Securities Act.
"Replacement Assets" means assets and property that will be
used in the business of the Company and/or its
<PAGE> 36
Restricted Subsidiaries as existing on the Issue Date or in a business the same,
similar or reasonably related thereto (including Capital Stock of a Person which
becomes a Restricted Subsidiary if such Person is engaged in businesses which
comply with Section 4.21 hereof).
"Representative" means the indenture trustee or other trustee,
agent or representative in respect of any Designated Senior Debt; PROVIDED that
if, and for so long as, any Designated Senior Debt lacks such a representative,
then the Representative for such Designated Senior Debt shall at all times
constitute the holders of a majority in outstanding principal amount of such
Designated Senior Debt in respect of any Designated Senior Debt.
"Responsible Officer" shall mean, when used with respect to
the Trustee, any officer in the Corporate Trust Department of the Trustee
including any vice president, assistant vice president or any other officer of
the Trustee who customarily performs functions similar to those performed by the
Persons who at the time shall be such officers, respectively, and to whom any
corporate trust matter is referred because of such officer's knowledge of and
familiarity with the particular subject.
"Restricted Payment" has the meaning provided in Section 4.04.
"Restricted Security" has the meaning set forth in Rule
144(a)(3) under the Securities Act; PROVIDED that the Trustee shall be entitled
to request and conclusively rely upon an Opinion of Counsel with respect to
whether any Security is a Restricted Security.
"Restricted Subsidiary" means any Subsidiary of the Company
that has not been designated by the Board of Directors of the Company, by a
Board Resolution delivered to the Trustee, as an Unrestricted Subsidiary
pursuant to and in compliance with Section 4.23 hereof. Any such Designation may
be revoked by a Board Resolution of the Company delivered to the Trustee,
subject to the provisions of such covenant.
<PAGE> 37
"Revocation" has the meaning provided in Section 4.23.
"Rule 144A" means Rule 144A under the Securities Act.
"Sale and Leaseback Transaction" means any direct or indirect
arrangement with any Person or to which any such Person is a party, providing
for the leasing to the Company or a Restricted Subsidiary of any property,
whether owned by the Company or any Restricted Subsidiary at the Issue Date or
later acquired, which has been or is to be sold or transferred by the Company or
such Restricted Subsidiary to such Person or to any other Person from whom funds
have been or are to be advanced by such Person on the security of such Property.
"SEC" means the Securities and Exchange Commission, as from
time to time constituted, or if at any time after the execution of this
Indenture such Commission is not existing and performing the applicable duties
now assigned to it, then the body or bodies performing such duties at such time.
"Securities" means the Series A Securities and the Series B
Securities treated as a single class of securities, as amended or supplemented
from time to time in accordance with the terms hereof, that are issued pursuant
to this Indenture.
"Securities Act" means the Securities Act of 1933, as amended,
or any successor statute or statutes thereto, and the rules and regulations of
the Commission promulgated thereunder.
"Senior Debt" means the principal of, premium, if any, and
interest (including any interest accruing subsequent to the filing of a petition
of bankruptcy at the rate provided for in the documentation with respect
thereto, whether or not such interest is an allowed claim under applicable law)
on any Indebtedness of the Company, whether outstanding on the Issue Date or
thereafter created, incurred or assumed, unless, in the case of any particular
Indebtedness, the instrument creating or evidencing the same or pursuant to
which the same is outstanding expressly provides that such Indebtedness shall
not be senior in right of payment to the Securities. Without
<PAGE> 38
limiting the generality of the foregoing, "Senior Debt" shall also include the
principal of, premium, if any, interest (including any interest accruing
subsequent to the filing of a petition of bankruptcy at the rate provided for in
the documentation with respect thereto, whether or not such interest is an
allowed claim under applicable law) on, and all other amounts owing in respect
of, (x) all monetary obligations of every nature of the Company under the Credit
Agreement, including, without limitation, obligations to pay principal and
interest reimbursement obligations under letters of credit, fees, expenses and
indemnities, (y) all Interest Swap Obligations and (z) all obligations under
Currency Agreements, in each case whether outstanding on the Issue Date or
thereafter incurred. Notwithstanding the foregoing, "Senior Debt" shall not
include (i) any Indebtedness of the Company to a Restricted Subsidiary or any
Affiliate of the Company or any of such Affiliate's Subsidiaries, (ii)
Indebtedness to, or guaranteed on behalf of, any shareholder, director, officer
or employee of the Company or any Restricted Subsidiary (including without
limitation, amounts owed for compensation), (iii) Indebtedness to trade
creditors and other amounts incurred in connection with obtaining goods,
materials or services, (iv) Indebtedness represented by Disqualified Capital
Stock, (v) any liability for federal, state, local or other taxes owed by the
Company, (vi) Indebtedness incurred in violation of Section 4.03, (vii)
Indebtedness which, when incurred and without respect to any election under
Section 1111(b) of Title 11, United States Code, is without recourse to the
Company and (viii) any Indebtedness which is, by its express terms, subordinated
in right of payment to any other Indebtedness of the Company.
"Series A Securities" means the 10 1/4% Senior Subordinated
Notes due 2008, Series A, of the Company issued pursuant to this Indenture and
sold pursuant to the Purchase Agreement.
"Series B Securities" means the 10 1/4% Senior Subordinated
Notes due 2008, Series B, of the Company to be issued in exchange for the Series
A Securities pursuant to this Indenture.
<PAGE> 39
"Significant Subsidiary" means, with respect to any Person,
any Restricted Subsidiary of such Person that satisfies the criteria for a
"significant subsidiary" set forth in Rule 1.02(w) of Regulation S-X under the
Securities Act.
"Subsidiary", with respect to any Person, means (a) any
corporation of which the outstanding Capital Stock having at least a majority of
the votes entitled to be cast in the election of directors under ordinary
circumstances shall at the time be owned, directly or indirectly, by such Person
or (b) any other Person of which at least a majority of the voting interest
under ordinary circumstances is at the time, directly or indirectly, owned by
such Person.
"Surviving Entity" has the meaning provided in Section 5.01.
"TIA" means the Trust Indenture Act of 1939 (15 U.S.C. ss.ss.
77aaa-77bbbb), as amended, as in effect on the date of the execution of this
Indenture until such time as this Indenture is qualified under the TIA, and
thereafter as in effect on the date on which this Indenture is qualified under
the TIA, except as otherwise provided in Section 9.03.
"Trustee" means the party named as such in this Indenture
until a successor replaces it in accordance with the provisions of this
Indenture and thereafter means such successor.
"Unrestricted Subsidiary" means any Subsidiary of the Company
designated as such pursuant to and in compliance with Section 4.23. Any such
designation may be revoked by a Board Resolution of the Company delivered to the
Trustee, subject to the provisions of such covenant.
"U.S. Government Obligations" shall have the meaning provided
in Section 8.01.
"U.S. Legal Tender" means such coin or currency in immediately
available funds of the United States of America as
<PAGE> 40
at the time of payment shall be legal tender for the payment of public and
private debts.
"U.S. Physical Securities" shall have the meaning set forth in
Section 2.01.
"Weighted Average Life to Maturity" means, when applied to any
Indebtedness at any date, the number of years obtained by dividing (a) the then
outstanding aggregate principal amount of such Indebtedness into (b) the sum of
the total of the products obtained by multiplying (i) the amount of each then
remaining installment, sinking fund, serial maturity or other required payment
of principal, including payment at final maturity, in respect thereof, by (ii)
the number of years (calculated to the nearest one-twelfth) which will elapse
between such date and the making of such payment.
"Wholly Owned Restricted Subsidiary" of the Company means any
Restricted Subsidiary of which all the outstanding voting securities (other than
in the case of a Foreign Restricted Subsidiary, directors' qualifying shares or
an immaterial amount of shares required to be owned by other Persons pursuant to
applicable law) are owned by the Company or any Wholly Owned Restricted
Subsidiary.
SECTION 1.02. INCORPORATION BY REFERENCE OF TIA.
Whenever this Indenture refers to a provision of the TIA, such
provision is incorporated by reference in, and made a part of, this Indenture.
The following TIA terms used in this Indenture have the following meanings:
"Commission" means the SEC.
"indenture securities" means the Securities.
"indenture security holder" means a Holder or a
Securityholder.
"indenture to be qualified" means this Indenture.
<PAGE> 41
"indenture trustee" or "institutional trustee" means the
Trustee.
"obligor" on the indenture securities means the Company, any
Guarantor and any other obligor on the Securities.
All other TIA terms used in this Indenture that are defined by
the TIA, defined by TIA reference to another statute or defined by SEC rule and
not otherwise defined herein have the meanings assigned to them therein.
SECTION 1.03. RULES OF CONSTRUCTION.
Unless the context otherwise requires:
(1) a term has the meaning assigned to it;
(2) an accounting term not otherwise defined has the
meaning assigned to it in accordance with GAAP;
(3) "or" is not exclusive;
(4) words in the singular include the plural, and words
in the plural include the singular;
(5) provisions apply to successive events and
transactions; and
(6) "herein," "hereof" and other words of similar import
refer to this Indenture as a whole and not to any particular Article,
Section or other subdivision.
ARTICLE TWO
THE SECURITIES
SECTION 2.01. FORM AND DATING.
The Series A Securities and the Trustee's certificate of
authentication thereof shall be substantially in the form of EXHIBIT A annexed
hereto, which is hereby incorporated in and
<PAGE> 42
expressly made a part of this Indenture. The Series B Securities and the
Trustee's certificate of authentication thereof shall be substantially in the
form of EXHIBIT B annexed hereto, which is hereby incorporated in and expressly
made a part of this Indenture. The Securities may have notations, legends or
endorsements (including notations relating to any Guarantees, stock exchange
rule or usage). The Company and the Trustee shall approve the form of the
Securities and any notation, legend or endorsement (including notations relating
to any Guarantees) on them. Each Security shall be dated the date of its
issuance and shall be authenticated by the Trustee.
Securities offered and sold in reliance on Rule 144A shall be
issued initially in the form of one or more permanent Global Securities in
registered form, substantially in the form set forth in EXHIBIT A, deposited
with the Trustee, as custodian for the Depository, and shall bear the legend set
forth on EXHIBIT C. The aggregate principal amount of any Global Security may
from time to time be increased or decreased by adjustments made on the records
of the Trustee, as custodian for the Depository, as hereinafter provided.
Securities offered and sold in offshore transactions in
reliance on Regulation S shall be issued in the form of certificated Securities
in registered form in substantially the form set forth in EXHIBIT A (the
"Offshore Physical Securities"). Securities offered and sold in reliance on any
other exemption from registration under the Securities Act other than as
described in the preceding paragraph shall be issued, and Securities offered and
sold in reliance on Rule 144A may be issued, in the form of certificated
Securities in registered form in substantially the form set forth in EXHIBIT A
(the "U.S. Physical Securities"). The Offshore Physical Securities and the U.S.
Physical Securities are sometimes collectively herein referred to as the
"Physical Securities."
SECTION 2.02. EXECUTION AND AUTHENTICATION.
Two Officers, or an Officer and an Assistant Secretary, shall
sign, or one Officer shall sign and one
<PAGE> 43
Officer or an Assistant Secretary (each of whom shall, in each case, have been
duly authorized by all requisite corporate actions) shall attest to, the
Securities for the Company by manual or facsimile signature. The Company's seal
shall also be reproduced on the Securities.
If an Officer or Assistant Secretary whose signature is on a
Security was an Officer or Assistant Secretary at the time of such execution but
no longer holds that office at the time the Trustee authenticates the Security,
the Security shall be valid nevertheless. Each Guarantor shall execute its
Guarantee in the manner set forth in Section 10.07.
A Security shall not be valid until an authorized signatory of
the Trustee manually signs the certificate of authentication on the Security.
The signature shall be conclusive evidence that the Security has been
authenticated under this Indenture.
The Trustee shall authenticate Securities upon a written order
of the Company in the form of an Officers' Certificate. The Officers'
Certificate shall specify the amount of Securities to be authenticated, the
series of Securities and the date on which the Securities are to be
authenticated. The aggregate principal amount of Securities outstanding at any
time may not exceed $150,000,000, except as provided in Section 2.07. Upon
receipt of a written order of the Company in the form of an Officers'
Certificate, the Trustee shall authenticate Securities in substitution for
Securities originally issued to reflect any name change of the Company.
The Trustee may appoint an authenticating agent reasonably
acceptable to the Company to authenticate Securities. Unless otherwise provided
in the appointment, an authenticating agent may authenticate Securities whenever
the Trustee may do so. Each reference in this Indenture to authentication by the
Trustee includes authentication by such agent. An authenticating agent has the
same rights as an Agent to deal with the Company and Affiliates of the Company.
<PAGE> 44
The Securities shall be issuable only in registered form
without coupons in denominations of $1,000 and any integral multiple thereof.
SECTION 2.03. REGISTRAR AND PAYING AGENT.
The Company shall maintain an office or agency in the Borough
of Manhattan, The City of New York, where (a) Securities may be presented or
surrendered for registration of transfer or for exchange ("Registrar"), (b)
Securities may be presented or surrendered for payment ("Paying Agent") and (c)
notices and demands in respect of the Securities and this Indenture may be
served. The Registrar shall keep a register of the Securities and of their
transfer and exchange. The Company, upon written notice to the Trustee, may have
one or more co-Registrars and one or more additional Paying Agents reasonably
acceptable to the Trustee. The term "Paying Agent" includes any additional
Paying Agent. The Company initially appoints the Trustee as Registrar and Paying
Agent until such time as the Trustee has resigned or a successor has been
appointed. Neither the Company nor any Affiliate of the Company may act as
Paying Agent except as otherwise expressly provided in the form of the Security.
SECTION 2.04. PAYING AGENT TO HOLD ASSETS IN TRUST.
The Company shall require each Paying Agent other than the
Trustee to agree in writing that each Paying Agent shall hold in trust for the
benefit of Holders or the Trustee all assets held by the Paying Agent for the
payment of principal of, premium if any, or interest on, the Securities, and
shall notify the Trustee in writing of any Default by the Company in making any
such payment. The Company at any time may require a Paying Agent to distribute
all assets held by it to the Trustee and account for any assets disbursed and
the Trustee may at any time, but shall be under no obligation to, during the
continuance of any payment Default, upon written request to a Paying Agent,
require such Paying Agent to distribute all assets held by it to the Trustee and
to account for any assets distributed. Upon distribution to the Trustee of all
assets that shall have been delivered by the Company to
<PAGE> 45
the Paying Agent, the Paying Agent shall have no further liability for such
assets.
SECTION 2.05. SECURITYHOLDER LISTS.
The Trustee shall preserve in as current a form as is
reasonably practicable the most recent list available to it of the names and
addresses of Holders. If the Trustee is not the Registrar, the Company shall
furnish to the Trustee before each Record Date and at such other times as the
Trustee may request in writing a list as of such date and in such form as the
Trustee may reasonably require of the names and addresses of Holders, which list
may be conclusively relied upon by the Trustee.
SECTION 2.06. TRANSFER AND EXCHANGE.
Subject to the provisions of Sections 2.15 and 2.16, when
Securities are presented to the Registrar or a co-Registrar with a request to
register the transfer of such Securities or to exchange such Securities for an
equal principal amount of Securities of other authorized denominations of the
same series, the Registrar or co-Registrar shall register the transfer or make
the exchange as requested if its requirements for such transaction are met;
PROVIDED, HOWEVER, that the Securities surrendered for transfer or exchange
shall be duly endorsed or accompanied by a written instrument of transfer in
form satisfactory to the Company and the Registrar or co-Registrar, duly
executed by the Holder thereof or his attorney duly authorized in writing. To
permit registrations of transfers and exchanges, the Company shall execute and
the Trustee shall authenticate Securities at the Registrar's or co-Registrar's
written request. No service charge shall be made for any registration of
transfer or exchange, but the Company may require payment of a sum sufficient to
cover any transfer tax or similar governmental charge payable in connection
therewith (other than any such transfer taxes or other governmental charge
payable upon exchanges or transfers pursuant to Section 2.02, 2.10, 3.06, 4.12,
4.24 or 9.05). The Registrar or co-Registrar shall not be required to register
the transfer of or exchange of any
<PAGE> 46
Security (i) during a period beginning at the opening of business 15 days before
the mailing of a notice of redemption of Securities and ending at the close of
business on the day of such mailing and (ii) selected for redemption in whole or
in part pursuant to Article Three, except the unredeemed portion of any Security
being redeemed in part.
Any Holder of a Global Security shall, by acceptance of such
Global Security, agree that transfers of beneficial interests in such Global
Security may be effected only through a book-entry system maintained by the
Depository (or its agent), and that ownership of a beneficial interest in a
Global Security shall be required to be reflected in a book entry system.
SECTION 2.07. REPLACEMENT SECURITIES.
If a mutilated Security is surrendered to the Trustee or if
the Holder of a Security claims that the Security has been lost, destroyed or
wrongfully taken, the Company shall issue and the Trustee shall authenticate
upon written notice from the Company a replacement Security if the Trustee's
requirements are met. If required by the Trustee or the Company, such Holder
must provide an indemnity bond or other indemnity, sufficient in the judgment of
both the Company and the Trustee, to protect the Company, the Trustee and any
Agent from any loss which any of them may suffer if a Security is replaced. The
Company and the Trustee may charge such Holder for their respective reasonable
out-of-pocket expenses in replacing a Security, including reasonable fees and
expenses of counsel. Every replacement Security is an additional obligation of
the Company.
SECTION 2.08. OUTSTANDING SECURITIES.
Securities outstanding at any time are all the Securities that
have been authenticated by the Trustee except those canceled by it, those
delivered to it for cancellation and those described in this Section as not
outstanding. Subject to Section 2.09, a Security does not cease to be
<PAGE> 47
outstanding because the Company or any of its Affiliates holds the Security.
If a Security is replaced pursuant to Section 2.07 (other than
a mutilated Security surrendered for replacement), it ceases to be outstanding
unless the Trustee receives proof satisfactory to it that the replaced Security
is held by a BONA FIDE purchaser. A mutilated Security ceases to be outstanding
upon surrender of such Security and replacement thereof pursuant to Section
2.07.
If on a Redemption Date or the Final Maturity Date the Paying
Agent holds U.S. Legal Tender or U.S. Government Obligations sufficient to pay
all of the principal and interest due on the Securities payable on that date,
then on and after that date such Securities cease to be outstanding and interest
on them ceases to accrue.
SECTION 2.09. TREASURY SECURITIES.
In determining whether the Holders of the required principal
amount of Securities have concurred in any direction, waiver or consent,
Securities owned by the Company, any Guarantor or any of their respective
Affiliates shall be disregarded, except that, for the purposes of determining
whether the Trustee shall be protected in relying on any such direction, waiver
or consent, only Securities that a Responsible Officer of the Trustee actually
knows are so owned shall be disregarded.
The Trustee may require an Officers' Certificate listing
Securities owned by the Company, any Guarantor or any of their respective
Affiliates.
SECTION 2.10. TEMPORARY SECURITIES.
Until definitive Securities are ready for delivery, the
Company may prepare and the Trustee shall authenticate temporary Securities upon
receipt of a written order of the Company in the form of an Officers'
Certificate. The Officers' Certificate shall specify the amount of temporary
Securities to
<PAGE> 48
be authenticated and the date on which the temporary Securities are to be
authenticated. Temporary Securities shall be substantially in the form of
definitive Securities but may have variations that the Company considers
appropriate for temporary Securities. Without unreasonable delay, the Company
shall prepare and the Trustee shall authenticate upon receipt of a written order
of the Company pursuant to Section 2.02 definitive Securities in exchange for
temporary Securities.
SECTION 2.11. CANCELLATION.
The Company at any time may deliver Securities to the Trustee
for cancellation. The Registrar and the Paying Agent shall forward to the
Trustee any Securities surrendered to them for transfer, exchange or payment.
The Trustee, or at the direction of the Trustee, the Registrar or the Paying
Agent, and no one else, shall cancel and, at the written direction of the
Company, shall dispose of all Securities surrendered for transfer, exchange,
payment or cancellation. Subject to Section 2.07, the Company may not issue new
Securities to replace Securities that it has paid or delivered to the Trustee
for cancellation. If the Company or any Guarantor shall acquire any of the
Securities, such acquisition shall not operate as a redemption or satisfaction
of the Indebtedness represented by such Securities unless and until the same are
surrendered to the Trustee for cancellation pursuant to this Section 2.11.
SECTION 2.12. DEFAULTED INTEREST.
If the Company defaults in a payment of interest on the
Securities, it shall pay interest on overdue principal and on overdue
installments of interest (without grace periods) from time to time on demand at
the rate of 2% PER ANNUM in excess of the rate shown on the Security.
SECTION 2.13. CUSIP NUMBER.
The Company in issuing the Securities will use a "CUSIP"
number, and if so, the Trustee shall use the CUSIP number in notices of
redemption or exchange as a convenience to
<PAGE> 49
Holders; PROVIDED that any such notice may state that no representation is made
as to the correctness or accuracy of the CUSIP number printed in the notice or
on the Securities, and that reliance may be placed only on the other
identification numbers printed on the Securities.
SECTION 2.14. DEPOSIT OF MONEYS.
Prior to 11:00 a.m. New York City time on each Interest
Payment Date and the Final Maturity Date, the Company shall deliver by wire
transfer to the Paying Agent in immediately available funds money sufficient to
make cash payments due on such Interest Payment Date or the Final Maturity Date,
as the case may be, in a timely manner which permits the Paying Agent to remit
payment to the Holders on such Interest Payment Date or the Final Maturity Date,
as the case may be.
SECTION 2.15. BOOK-ENTRY PROVISIONS FOR GLOBAL SECURITIES.
(a) The Global Securities initially shall (i) be
registered in the name of the Depository or the nominee of such Depository, (ii)
be delivered to the Trustee as custodian for such Depository and (iii) bear
legends as set forth in EXHIBIT C.
Members of, or participants in, the Depository
("Participants") shall have no rights under this Indenture with respect to any
Global Security held on their behalf by the Depository, or the Trustee as its
custodian, or under the Global Security, and the Depository may be treated by
the Company, the Trustee and any agent of the Company or the Trustee as the
absolute owner of the Global Security for all purposes whatsoever.
Notwithstanding the foregoing, nothing herein shall prevent the Company, the
Trustee or any agent of the Company or the Trustee from giving effect to any
written certification, proxy or other authorization furnished by the Depository
or impair, as between the Depository and Participants, the operation of
customary practices governing the exercise of the rights of a Holder of any
Security.
<PAGE> 50
(b) Transfers of Global Securities shall be limited to
transfers in whole, but not in part, to the Depository, its successors or their
respective nominees. Interests of beneficial owners in the Global Securities may
be transferred or exchanged for Physical Securities in accordance with the rules
and procedures of the Depository and the provisions of Section 2.16. In
addition, Physical Securities shall be transferred to all beneficial owners in
exchange for their beneficial interests in Global Securities if (i) the
Depository notifies the Company that it is unwilling or unable to continue as
Depository for any Global Security and a successor depositary is not appointed
by the Company within 90 days of such notice or (ii) an Event of Default has
occurred and is continuing and the Registrar has received a request from the
Depository to issue Physical Securities.
(c) In connection with the transfer of Global Securities
as an entirety to beneficial owners pursuant to paragraph (b) of this Section
2.15, the Global Securities shall be deemed to be surrendered to the Trustee for
cancellation, and the Company shall execute, and the Trustee shall upon written
instructions from the Company authenticate and deliver, to each beneficial owner
identified by the Depository in exchange for its beneficial interest in the
Global Securities, an equal aggregate principal amount of Physical Securities of
authorized denominations.
(d) Any Physical Security constituting a Restricted
Security delivered in exchange for an interest in a Global Security pursuant to
paragraph (b) or (c) of this Section 2.15 shall, except as otherwise provided by
Section 2.16, bear the Private Placement Legend.
(e) The Holder of any Global Security may grant proxies
and otherwise authorize any Person, including Participants and Persons that may
hold interests through Participants, to take any action which a Holder is
entitled to take under this Indenture or the Securities.
<PAGE> 51
SECTION 2.16. REGISTRATION OF TRANSFERS AND EXCHANGES.
(a) TRANSFER AND EXCHANGE OF PHYSICAL SECURITIES. When
Physical Securities are presented to the Registrar with a request:
(i) to register the transfer of the Physical Securities;
or
(ii) to exchange such Physical Securities for an equal
number of Physical Securities of other authorized denominations,
the Registrar shall register the transfer or make the exchange as requested if
the requirements under this Indenture as set forth in this Section 2.16 for such
transactions are met; PROVIDED, HOWEVER, that the Physical Securities presented
or surrendered for registration of transfer or exchange:
(I) shall be duly endorsed or accompanied by a written
instrument of transfer in form satisfactory to the Registrar or
co-Registrar, duly executed by the Holder thereof or his attorney duly
authorized in writing; and
(II) in the case of Physical Securities the offer and sale
of which have not been registered under the Securities Act, such
Physical Securities shall be accompanied by an Opinion of Counsel
addressed to the Registrar to the effect that such transfer and
exchange is in compliance with applicable securities law and, in the
sole discretion of the Company, by the following additional information
and documents, as applicable:
(A) if such Physical Security is being delivered
to the Registrar by a holder for registration in the name of
such holder, without transfer, a certification from such
holder to that effect (in substantially the form of EXHIBIT D
hereto); or
(B) if such Physical Security is being
transferred to a Qualified Institutional Buyer in
<PAGE> 52
accordance with Rule 144A under the Securities Act, a
certification to that effect (in substantially the form of
EXHIBIT D hereto); or
(C) if such Physical Security is being
transferred to an Institutional Accredited Investor, delivery
of a certification to that effect (in substantially the form
of EXHIBIT D hereto) and a Transferee Certificate for
Institutional Accredited Investors in substantially the form
of EXHIBIT E hereto; or
(D) if such Physical Security is being
transferred in reliance on Regulation S, delivery of a
certification to that effect (in substantially the form of
EXHIBIT D hereto) and a Transferee Certificate for Regulation
S Transfers in substantially the form of EXHIBIT F hereto and
an Opinion of Counsel reasonably satisfactory to the Company
to the effect that such transfer is in compliance with the
Securities Act; or
(E) if such Physical Security is being
transferred in reliance on Rule 144 under the Securities Act,
delivery of a certification to that effect (in substantially
the form of EXHIBIT D hereto) and an Opinion of Counsel
reasonably satisfactory to the Company to the effect that such
transfer is in compliance with the Securities Act; or
(F) if such Physical Security is being
transferred in reliance on another exemption from the
registration requirements of the Securities Act, a
certification to that effect (in substantially the form of
EXHIBIT D hereto) and an Opinion of Counsel reasonably
satisfactory to the Company to the effect that such transfer
is in compliance with the Securities Act.
(b) RESTRICTIONS ON TRANSFER OF A PHYSICAL SECURITY FOR A
BENEFICIAL INTEREST IN A GLOBAL SECURITY. A Physical
<PAGE> 53
Security may not be exchanged for a beneficial interest in a Global Security
except upon satisfaction of the requirements set forth below. Upon receipt by
the Registrar of a Physical Security, duly endorsed or accompanied by
appropriate instruments of transfer, in form satisfactory to the Registrar,
together with:
(A) a certification, in substantially the form
of EXHIBIT D hereto, that such Physical Security is being
transferred to a Qualified Institutional Buyer; and
(B) written instructions directing the Registrar
to make, or to direct the Depository to make, an endorsement
on the Global Security to reflect an increase in the aggregate
amount of the Securities represented by the Global Security,
then the Registrar shall cancel such Physical Security and cause, or direct the
Depository to cause, in accordance with the standing instructions and procedures
existing between the Depository and the Registrar, the number of Securities
represented by the Global Security to be increased accordingly. If no Global
Security is then outstanding, the Company shall issue and the Trustee shall upon
written instructions from the Company authenticate a new Global Security in the
appropriate amount.
(c) TRANSFER AND EXCHANGE OF GLOBAL SECURITIES. The
transfer and exchange of Global Securities or beneficial interests therein shall
be effected through the Depository, in accordance with this Indenture (including
the restrictions on transfer set forth herein) and the procedures of the
Depository therefor.
(d) TRANSFER OF A BENEFICIAL INTEREST IN A GLOBAL
SECURITY FOR A PHYSICAL SECURITY.
(i) Any Person having a beneficial interest in a Global
Security may upon request exchange such beneficial interest for a
Physical Security. Upon receipt by the
<PAGE> 54
Registrar of written instructions or such other form of instructions as
is customary for the Depository from the Depository or its nominee on
behalf of any Person having a beneficial interest in a Global Security
and upon receipt by the Trustee of a written order or such other form
of instructions as is customary for the Depository or the Person
designated by the Depository as having such a beneficial interest
containing registration instructions and, in the case of any such
transfer or exchange of a beneficial interest in Securities the offer
and sale of which have not been registered under the Securities Act,
the following additional information and documents:
(A) if such beneficial interest is being
transferred to the Person designated by the Depository as
being the beneficial owner, a certification from such Person
to that effect (in substantially the form of EXHIBIT D
hereto); or
(B) if such beneficial interest is being
transferred to a Qualified Institutional Buyer in accordance
with Rule 144A under the Securities Act, a certification to
that effect (in substantially the form of EXHIBIT D hereto);
or
(C) if such beneficial interest is being
transferred to an Institutional Accredited Investor, delivery
of a certification to that effect (in substantially the form
of EXHIBIT D hereto) and a Certificate for Institutional
Accredited Investors in substantially the form of EXHIBIT E
hereto; or
(D) if such beneficial interest is being
transferred in reliance on Regulation S, delivery of a
certification to that effect (in substantially the form of
EXHIBIT D hereto) and a Transferee Certificate for Regulation
S Transfers in substantially the form of EXHIBIT F hereto and
an Opinion of Counsel reasonably satisfactory to the Company
to the effect that such transfer is in compliance with the
Securities Act; or
<PAGE> 55
(E) if such beneficial interest is being
transferred in reliance on Rule 144 under the Securities Act,
delivery of a certification to that effect (in substantially
the form of EXHIBIT D hereto) and an Opinion of Counsel
reasonably satisfactory to the Company to the effect that such
transfer is in compliance with the Securities Act; or
(F) if such beneficial interest is being
transferred in reliance on another exemption from the
registration requirements of the Securities Act, a
certification to that effect (in substantially the form of
EXHIBIT D hereto) and an Opinion of Counsel reasonably
satisfactory to the Company to the effect that such transfer
is in compliance with the Securities Act,
then the Registrar will cause, in accordance with the standing
instructions and procedures existing between the Depository and the
Registrar, the aggregate amount of the Global Security to be reduced
and, following such reduction, the Company will execute and, upon
receipt of an authentication order in the form of an Officers'
Certificate, the Trustee will authenticate and deliver to the
transferee a Physical Security.
(ii) Securities issued in exchange for a beneficial
interest in a Global Security pursuant to this Section 2.16(d) shall be
registered in such names and in such authorized denominations as the
Depository, pursuant to instructions from its direct or indirect
participants or otherwise, shall instruct the Registrar in writing. The
Registrar shall deliver such Physical Securities to the Persons in
whose names such Physical Securities are so registered.
(e) RESTRICTIONS ON TRANSFER AND EXCHANGE OF GLOBAL
SECURITIES. Notwithstanding any other provisions of this Indenture, a Global
Security may not be transferred as a whole except by the Depository to a nominee
of the Depository or by a nominee of the Depository to the Depository or another
nominee
<PAGE> 56
of the Depository or by the Depository or any such nominee to a successor
Depository or a nominee of such successor Depository.
(f) PRIVATE PLACEMENT LEGEND. Upon the transfer, exchange
or replacement of Securities not bearing the Private Placement Legend, the
Registrar shall deliver Securities that do not bear the Private Placement
Legend. Upon the transfer, exchange or replacement of Securities bearing the
Private Placement Legend, the Registrar shall deliver only Securities that bear
the Private Placement Legend unless, and the Trustee is hereby authorized to
deliver Securities without the Private Placement Legend if, (i) there is
delivered to the Trustee an Opinion of Counsel reasonably satisfactory to the
Company and the Trustee to the effect that neither such legend nor the related
restrictions on transfer are required in order to maintain compliance with the
provisions of the Securities Act or (ii) such Security has been sold pursuant to
an effective registration statement under the Securities Act.
(g) GENERAL. By its acceptance of any Security bearing
the Private Placement Legend, each Holder of such a Security acknowledges the
restrictions on transfer of such Security set forth in this Indenture and in the
Private Placement Legend and agrees that it will transfer such Security only as
provided in this Indenture.
The Registrar shall retain copies of all letters, notices and
other written communications received pursuant to Section 2.15 or this Section
2.16. The Company shall have the right to inspect and make copies of all such
letters, notices or other written communications at any reasonable time upon the
giving of reasonable written notice to the Registrar.
<PAGE> 57
ARTICLE THREE
REDEMPTION
SECTION 3.01. NOTICES TO TRUSTEE.
If the Company elects to redeem Securities pursuant to
Paragraph 5 or Paragraph 6 of the Securities, it shall notify the Trustee in
writing of the Redemption Date, the Redemption Price and the principal amount of
Securities to be redeemed. The Company shall give notice of redemption to
Trustee at least 45 days but not more than 60 days before the Redemption Date
(unless a shorter notice shall be agreed to by the Trustee in writing), together
with an Officers' Certificate stating that such redemption will comply with the
conditions contained herein.
SECTION 3.02. SELECTION OF SECURITIES TO BE REDEEMED.
If fewer than all of the Securities are to be redeemed, the
Trustee shall select the Securities to be redeemed, on a PRO RATA basis, by lot
or by such method as the Trustee shall deem fair and appropriate; PROVIDED,
HOWEVER, that if the Securities are redeemed pursuant to Paragraph 6 of the
Securities, the Securities shall be redeemed solely on a PRO RATA basis or on as
nearly a PRO RATA basis as is practicable (subject to the procedures of the
Depository) unless the securities exchange, if any, on which the Securities are
listed requires a different method. If the Securities are listed on any national
securities exchange, the Company shall notify the Trustee in writing of the
requirements of such exchange in respect of any redemption. The Trustee shall
make the selection from the Securities outstanding and not previously called for
redemption and shall promptly notify the Company in writing of the Securities
selected for redemption and, in the case of any Security selected for partial
redemption, the principal amount thereof to be redeemed. The Trustee may select
for redemption portions (equal to $1,000 or any integral multiple thereof) of
the principal of Securities that have denominations larger than $1,000.
Provisions of this
<PAGE> 58
Indenture that apply to Securities called for redemption also apply to portions
of Securities called for redemption.
SECTION 3.03. NOTICE OF REDEMPTION.
At least 30 days but not more than 60 days before a Redemption
Date, the Company shall mail or cause to be mailed a notice of redemption by
first-class mail, postage prepaid, to each Holder whose Securities are to be
redeemed. At the Company's written request, the Trustee shall give the notice of
redemption in the Company's name and at the Company's expense. Each notice for
redemption shall identify the Securities to be redeemed and shall state:
(1) the Redemption Date;
(2) the Redemption Price and the amount of accrued
interest, if any, to be paid;
(3) the name and address of the Paying Agent;
(4) that Securities called for redemption must be
surrendered to the Paying Agent to collect the Redemption Price plus
accrued interest, if any;
(5) that, unless the Company defaults in making the
redemption payment, interest on Securities called for redemption ceases
to accrue on and after the Redemption Date, and the only remaining
right of the Holders of such Securities is to receive payment of the
Redemption Price and accrued interest, if any, to the Redemption Date
upon surrender to the Paying Agent of the Securities redeemed;
(6) if any Security is being redeemed in part, the
portion of the principal amount of such Security to be redeemed and
that, after the Redemption Date, and upon surrender of such Security, a
new Security or Securities in aggregate principal amount equal to the
unredeemed portion thereof will be issued;
(7) if fewer than all the Securities are to be redeemed,
the identification of the particular Securities
<PAGE> 59
(or portion thereof) to be redeemed, as well as the aggregate principal
amount of Securities to be redeemed and the aggregate principal amount
of Securities to be outstanding after such partial redemption; and
(8) the Paragraph of the Securities pursuant to which the
Securities are to be redeemed.
SECTION 3.04. EFFECT OF NOTICE OF REDEMPTION.
Once notice of redemption is mailed in accordance with Section
3.03, Securities called for redemption become due and payable on the Redemption
Date and at the Redemption Price plus accrued interest, if any. Upon surrender
to the Paying Agent, such Securities called for redemption shall be paid at the
Redemption Price (which shall include accrued interest thereon to the Redemption
Date), but installments of interest, the maturity of which is on or prior to the
Redemption Date, shall be payable to Holders of record at the close of business
on the relevant Record Dates.
SECTION 3.05. DEPOSIT OF REDEMPTION PRICE.
Prior to 11:00 a.m. New York City time on the Redemption Date,
the Company shall deposit with the Paying Agent U.S. Legal Tender sufficient to
pay the Redemption Price plus accrued interest, if any, of all Securities to be
redeemed on that date.
If the Company complies with the preceding paragraph, then,
unless the Company defaults in the payment of such Redemption Price plus accrued
interest, if any, interest on the Securities to be redeemed will cease to accrue
on and after the applicable Redemption Date, whether or not such Securities are
presented for payment.
SECTION 3.06. SECURITIES REDEEMED IN PART.
Upon surrender of a Security that is to be redeemed in part,
the Trustee shall authenticate for the Holder a new Security or Securities equal
in principal amount to the unredeemed portion of the Security surrendered.
<PAGE> 60
ARTICLE FOUR
COVENANTS
SECTION 4.01. PAYMENT OF SECURITIES.
The Company shall pay the principal of and interest on the
Securities in the manner provided in the Securities. An installment of principal
of or interest on the Securities shall be considered paid on the date it is due
if the Trustee or Paying Agent holds on that date U.S. Legal Tender designated
for and sufficient to pay the installment.
The Company shall pay, to the extent such payments are lawful,
interest on overdue principal and it shall pay interest on overdue installments
of interest (without regard to any applicable grace periods) from time to time
on demand at the rate borne by the Securities plus 2% per annum. Interest will
be computed on the basis of a 360-day year comprised of twelve 30-day months.
SECTION 4.02. MAINTENANCE OF OFFICE OR AGENCY.
The Company shall maintain in the Borough of Manhattan, The
City of New York, the office or agency required under Section 2.03. The Company
shall give prompt written notice to the Trustee of the location, and any change
in the location, of such office or agency. If at any time the Company shall fail
to maintain any such required office or agency or shall fail to furnish the
Trustee with the address thereof, such presentations, surrenders, notices and
demands may be made or served at the address of the Trustee set forth in Section
11.02. The Company hereby initially designates the office of the Trustee at 61
Broadway, New York, New York 10004, Attention: Corporate Trust Department, as
its office or agency in the Borough of Manhattan, The City of New York.
<PAGE> 61
SECTION 4.03. LIMITATION ON INCURRENCE OF ADDITIONAL INDEBTEDNESS.
The Company will not, and will not permit any of the
Restricted Subsidiaries to, directly or indirectly, create, incur, assume,
guarantee, acquire, become liable, contingently or otherwise, with respect to,
or otherwise become responsible for payment of (collectively, "incur") any
Indebtedness (other than Permitted Indebtedness); PROVIDED, HOWEVER, that if no
Default or Event of Default shall have occurred and be continuing at the time of
or as a consequence of the incurrence of any such Indebtedness, the Company or
any Guarantor may incur Indebtedness (including, without limitation, Acquired
Indebtedness) and the Restricted Subsidiaries may incur Acquired Indebtedness,
in each case if on the date of the incurrence of such Indebtedness, after giving
effect to the incurrence thereof, the Consolidated Fixed Charge Coverage Ratio
of the Company is greater than 2.0 to 1.0.
No Indebtedness incurred pursuant to the Consolidated Fixed
Charge Coverage Ratio test of the preceding paragraph (including, without
limitation, Indebtedness under the Credit Agreement) shall reduce the amount of
Indebtedness which may be incurred pursuant to any clause of the definition of
Permitted Indebtedness (including, without limitation, Indebtedness under the
Credit Agreement pursuant to clause (ii) of the definition of Permitted
Indebtedness).
Indebtedness of a Person existing at the time such Person
becomes a Restricted Subsidiary or which is secured by a Lien on an asset
acquired by the Company or a Restricted Subsidiary (whether or not such
Indebtedness is assumed by the acquiring Person) shall be deemed incurred at the
time the Person becomes a Restricted Subsidiary or at the time of the asset
acquisition, as the case may be.
SECTION 4.04. LIMITATION ON RESTRICTED PAYMENTS.
The Company will not, and will not cause or permit any of the
Restricted Subsidiaries to, directly or indirectly, (a) declare or pay any
dividend or make any distribution (other
<PAGE> 62
than dividends or distributions payable in Qualified Capital Stock of the
Company) on or in respect of shares of the Company's Capital Stock (including
any such payment made by any Person (including, without limitation, an
Unrestricted Subsidiary) with the proceeds from an Investment made by the
Company or a Restricted Subsidiary) to holders of such Capital Stock, (b)
purchase, redeem or otherwise acquire or retire for value any Capital Stock of
the Company or any warrants, rights or options to purchase or acquire shares of
any class of such Capital Stock (including any such payment made by any Person
(including, without limitation, an Unrestricted Subsidiary) with the proceeds
from an Investment made by the Company or a Restricted Subsidiary) or (c) make
any Investment (other than Permitted Investments) (each of the foregoing actions
set forth in clauses (a), (b) and (c) being referred to as a "Restricted
Payment"), if at the time of such Restricted Payment or immediately after giving
effect thereto, (i) a Default or an Event of Default shall have occurred and be
continuing or (ii) the Company is not able to incur at least $1.00 of additional
Indebtedness (other than Permitted Indebtedness) in compliance with Section 4.03
or (iii) the aggregate amount of Restricted Payments (including such proposed
Restricted Payment) made subsequent to the Issue Date (the amount expended for
such purpose, if other than in cash, being the fair market value of such
property as determined reasonably and in good faith by the Board of Directors of
the Company) shall exceed the sum of: (w) 50% of the cumulative Consolidated Net
Income (or if cumulative Consolidated Net Income shall be a loss, minus 100% of
such loss) of the Company earned subsequent to the Issue Date and through the
end of the most recent fiscal quarter for which financial statements are
available prior to the date such Restricted Payment occurs (the "Reference Date"
(treating such period as a single accounting period); PLUS (x) 100% of the fair
market value of the aggregate net proceeds received by the Company from any
Person (other than a Subsidiary of the Company) from the issuance and sale
subsequent to the Issue Date and on or prior to the Reference Date of Qualified
Capital Stock of the Company or of other securities converted to Qualified
Capital Stock of the Company; PLUS (y) without duplication of any amounts
included in
<PAGE> 63
clause (iii)(x) above, 100% of the fair market value of the aggregate net
proceeds of any contribution to the common equity capital of the Company
received by the Company from a holder of the Company's Capital Stock (excluding,
in the case of clauses (iii)(x) and (y), any net proceeds from a Public Equity
Offering to the extent used to redeem the Securities); PLUS (z) an amount equal
to the lesser of (A) the sum of the fair market value of the Capital Stock of an
Unrestricted Subsidiary owned by the Company and/or the Restricted Subsidiaries
and the aggregate amount of all Indebtedness of such Unrestricted Subsidiary
owed to the Company and each Restricted Subsidiary on the date of Revocation of
such Unrestricted Subsidiary as an Unrestricted Subsidiary in accordance with
Section 4.23 or (B) the Designation Amount with respect to such Unrestricted
Subsidiary on the date of the Designation of such Subsidiary as an Unrestricted
Subsidiary in accordance with Section 4.23.
Notwithstanding the foregoing, the provisions set forth in the
immediately preceding paragraph do not prohibit: (1) the payment of any dividend
within 60 days after the date of declaration of such dividend if the dividend
would have been permitted on the date of declaration; (2) the acquisition of any
shares of Capital Stock of the Company, either (i) solely in exchange for shares
of Qualified Capital Stock of the Company or (ii) through the application of net
proceeds of a substantially concurrent sale for cash (other than to a Subsidiary
of the Company) of shares of Qualified Capital Stock of the Company; (3) so long
as no Default or Event of Default shall have occurred and be continuing,
repurchases of Capital Stock (or options therefor) of the Company from officers,
directors, employees or consultants pursuant to equity ownership or compensation
plans or stockholders agreements not to exceed $1.0 million in any year; (4) so
long as no Default or Event of Default shall have occurred and be continuing,
other Restricted Payments in an aggregate amount not to exceed $5.0 million; and
(5) Restricted Payments made on the Issue Date in connection with the
Recapitalization Distribution as defined in the Offering Memorandum relating to
the Notes. In determining the aggregate amount of Restricted Payments made
subsequent to the Issue Date in accordance with clause (iii) of
<PAGE> 64
the immediately preceding paragraph, amounts expended pursuant to clauses (1),
(2), (3) and (4) shall be included in such calculation.
SECTION 4.05. CORPORATE EXISTENCE.
Except as otherwise permitted by Article Five, the Company
shall do or cause to be done all things necessary to preserve and keep in full
force and effect its corporate existence and the corporate, partnership or other
existence of each of the Restricted Subsidiaries in accordance with the
respective organizational documents of each Restricted Subsidiary and the rights
(charter and statutory) and material franchises of the Company and each of its
Restricted Subsidiaries; PROVIDED, HOWEVER, that the Company shall not be
required to preserve any such right or franchise, or the corporate existence of
any Restricted Subsidiary, if the Board of Directors of the Company shall
determine that the preservation thereof is no longer desirable in the conduct of
the business of the Company and its Restricted Subsidiaries, taken as a whole,
and that the loss thereof is not, and will not be, adverse in any material
respect to the Holders.
SECTION 4.06. PAYMENT OF TAXES AND OTHER CLAIMS.
The Company shall pay or discharge or cause to be paid or
discharged, before the same shall become delinquent, (i) all material taxes,
assessments and governmental charges levied or imposed upon it or any of the
Restricted Subsidiaries or upon the income, profits or property of it or any of
the Restricted Subsidiaries and (ii) all lawful claims for labor, materials and
supplies which, in each case, if unpaid, might by law become a material
liability or Lien upon the property of it or any of the Restricted Subsidiaries;
PROVIDED, HOWEVER, that the Company shall not be required to pay or discharge or
cause to be paid or discharged any such tax, assessment, charge or claim whose
amount, applicability or validity is being contested in good faith by
appropriate proceedings and for which appropriate provision has been made.
<PAGE> 65
SECTION 4.07. MAINTENANCE OF PROPERTIES AND INSURANCE.
(1) The Company shall cause all material properties owned
by or leased by it or any of the Restricted Subsidiaries used in the conduct of
its business or the business of any of the Restricted Subsidiaries to be
improved or maintained and kept in normal condition, repair and working order
(reasonable wear and tear excepted) and supplied with all necessary equipment
and shall cause to be made all necessary repairs, renewals, replacements,
betterments and improvements thereof, all as in its judgment may be necessary,
so that the business carried on in connection therewith may be properly and
advantageously conducted at all times; PROVIDED, HOWEVER, that nothing in this
Section 4.07 shall prevent the Company or any of the Restricted Subsidiaries
from discontinuing the use, operation or maintenance of any of such properties,
or disposing of any of them, if such discontinuance or disposal is, in the
judgment of the Board of Directors of the Company or of the Board of Directors
of any Restricted Subsidiary, or of an officer (or other agent employed by the
Company or of any of the Restricted Subsidiaries) of the Company or any of its
Restricted Subsidiaries having managerial responsibility for any such property,
desirable in the conduct of the business of the Company or any Restricted
Subsidiary, and if such discontinuance or disposal is not adverse in any
material respect to the Holders.
(2) The Company shall maintain, and shall cause the
Restricted Subsidiaries to maintain, insurance with responsible carriers against
such risks and in such amounts, and with such deductibles, retentions,
self-insured amounts and co-insurance provisions, as are customarily carried by
similar businesses of similar size, including property and casualty loss,
workers' compensation and interruption of business insurance.
SECTION 4.08. COMPLIANCE CERTIFICATE; NOTICE OF DEFAULT.
(1) The Company shall deliver to the Trustee, within 100
days after the close of each fiscal year an Officers' Certificate stating that a
review of the activities of the Company has been made under the supervision of
the signing
<PAGE> 66
officers with a view to determining whether it has kept, observed, performed and
fulfilled its obligations under this Indenture and further stating, as to each
such Officer signing such certificate, that to the best of his knowledge the
Company during such preceding fiscal year has kept, observed, performed and
fulfilled each and every such covenant and no Default or Event of Default
occurred during such year and at the date of such certificate no Default or
Event of Default has occurred and is continuing or, if such signers do know of
such Default or Event of Default, the certificate shall describe its status with
particularity. The Officers' Certificate shall also notify the Trustee should
the Company elect to change the manner in which it fixes its fiscal year end.
(2) The annual financial statements delivered pursuant to
Section 4.10 shall be accompanied by a written report of the Company's
independent accountants (who shall be a firm of established national reputation)
that in conducting their audit of such financial statements nothing has come to
their attention that would lead them to believe that the Company has violated
any provisions of Article Four, Five or Six of this Indenture insofar as they
relate to accounting matters or, if any such violation has occurred, specifying
the nature and period of existence thereof, it being understood that such
accountants shall not be liable directly or indirectly to any Person for any
failure to obtain knowledge of any such violation.
(3) The Company shall deliver to the Trustee, within ten
days of becoming aware of any Default or Event of Default in the performance of
any covenant, agreement or condition contained in this Indenture, an Officers'
Certificate specifying the Default or Event of Default and describing its status
with particularity.
SECTION 4.09. COMPLIANCE WITH LAWS.
The Company shall comply, and shall cause each of the
Restricted Subsidiaries to comply, with all applicable statutes, rules,
regulations, orders and restrictions of the United States of America, all states
and municipalities
<PAGE> 67
thereof, and of any governmental department, commission, board, regulatory
authority, bureau, agency and instrumentality of the foregoing, in respect of
the conduct of their respective businesses and the ownership of their respective
properties, except for such noncompliances as would not in the aggregate have a
material adverse effect on the financial condition or results of operations of
the Company and the Restricted Subsidiaries taken as a whole.
SECTION 4.10. SEC REPORTS.
(1) The Company will file with the SEC all information
documents and reports to be filed with the SEC pursuant to Section 13 or 15(d)
of the Exchange Act, whether or not the Company is subject to such filing
requirements so long as the SEC will accept such filings. The Company (at its
own expense) will file with the Trustee within 15 days after it files them with
the SEC, copies of the annual reports and of the information, documents and
other reports (or copies of such portions of any of the foregoing as the SEC may
by rules and regulations prescribe) which the Company files with the SEC
pursuant to Section 13 or 15(d) of the Exchange Act. Upon qualification of this
Indenture under the TIA, the Company shall also comply with the provisions of
TIA ss. 314(a).
(2) At the Company's expense, regardless of whether the
Company is required to furnish such reports to its stockholders pursuant to the
Exchange Act, the Company shall cause its consolidated financial statements,
comparable to that which would have been required to appear in annual or
quarterly reports, to be delivered to the Trustee and the Holders. The Company
will also make such reports available to prospective purchasers of the
Securities, securities analysts and broker-dealers upon their request.
(3) For so long as any of the Securities remain
outstanding the Company will make available to any prospective purchaser of the
Securities or beneficial owner of the Securities in connection with any sale
thereof the information required by Rule 144A(d)(4) under the Securities Act
during any
<PAGE> 68
period when the Company is not subject to Section 13 or 15(d) under the Exchange
Act.
SECTION 4.11. WAIVER OF STAY, EXTENSION OR USURY LAWS.
The Company covenants (to the extent that it may lawfully do
so) that it shall not at any time insist upon, plead, or in any manner
whatsoever claim or take the benefit or advantage of, any stay or extension law
or any usury law or other law that would prohibit or forgive the Company from
paying all or any portion of the principal of and/or interest on the Securities
as contemplated herein, wherever enacted, now or at any time hereafter in force,
or which may affect the covenants or the performance of this Indenture, and (to
the extent that it may lawfully do so) the Company hereby expressly waives all
benefit or advantage of any such law, and covenants that it will not hinder,
delay or impede the execution of any power herein granted to the Trustee, but
will suffer and permit the execution of every such power as though no such law
had been enacted.
SECTION 4.12. LIMITATION ON ASSET SALES.
The Company will not, and will not permit any of the
Restricted Subsidiaries to, consummate an Asset Sale unless (i) the Company or
the applicable Restricted Subsidiary, as the case may be, receives consideration
at the time of such Asset Sale at least equal to the fair market value of the
assets sold or otherwise disposed of (as determined in good faith by the
Company's Board of Directors), (ii) at least 75% of the consideration received
by the Company or the Restricted Subsidiary, as the case may be, from such Asset
Sale shall be in the form of cash, Cash Equivalents and/or Replacement Assets
and is received at the time of such disposition; and (iii) upon the consummation
of an Asset Sale, the Company shall apply, or cause such Restricted Subsidiary
to apply, the Net Cash Proceeds relating to such Asset Sale within 360 days of
receipt thereof either (A) to prepay any Senior Debt or Guarantor Senior Debt
and, in the case of any Senior Debt or Guarantor Senior Debt under any revolving
credit facility, effect a permanent reduction in the availability under such
revolving
<PAGE> 69
credit facility, (B) to acquire Replacement Assets, or (C) a combination of
prepayment and investment permitted by the foregoing clauses (iii)(A) and
(iii)(B). On the 361st day after an Asset Sale or such earlier date, if any, as
the Board of Directors of the Company or of such Restricted Subsidiary
determines not to apply the Net Cash Proceeds relating to such Asset Sale as set
forth in clauses (iii)(A), (iii)(B) and (iii)(C) of the next preceding sentence
(each, a "Net Proceeds Offer Trigger Date"), such aggregate amount of Net Cash
Proceeds which have not been applied on or before such Net Proceeds Offer
Trigger Date as permitted in clauses (iii)(A), (iii)(B) and (iii)(C) of the next
preceding sentence (each, a "Net Proceeds Offer Amount") shall be applied by the
Company to make an offer to purchase (the "Net Proceeds Offer") on a date (the
"Net Proceeds Offer Payment Date") not less than 30 nor more than 60 days
following the applicable Net Proceeds Offer Trigger Date, from all Holders on a
PRO RATA basis, that principal amount of Securities equal to the Net Proceeds
Offer Amount at a price equal to 100% of the principal amount of the Securities
to be purchased, plus accrued and unpaid interest, if any, thereon to the date
of purchase; PROVIDED, HOWEVER, that if at any time any non-cash consideration
received by the Company or any Restricted Subsidiary, as the case may be, in
connection with any Asset Sale is converted into or sold or otherwise disposed
of for cash (other than interest received with respect to any such non-cash
consideration) or Cash Equivalents, then such conversion or disposition shall be
deemed to constitute an Asset Sale hereunder and the Net Cash Proceeds thereof
shall be applied in accordance with this covenant. The Company may defer the Net
Proceeds Offer until there is an aggregate unutilized Net Proceeds Offer Amount
equal to or in excess of $5,000,000 resulting from one or more Asset Sales or
deemed Asset Sales (at which time, the entire unutilized Net Proceeds Offer
Amount, and not just the amount in excess of $5,000,000, shall be applied as
required pursuant to this paragraph).
In the event of the transfer of substantially all (but not
all) of the property and assets of the Company and the Restricted Subsidiaries
as an entirety to a Person in a
<PAGE> 70
transaction permitted under Section 5.01, the successor corporation shall be
deemed to have sold the properties and assets of the Company and the Restricted
Subsidiaries not so transferred for purposes of this covenant, and shall comply
with the provisions of this covenant with respect to such deemed sale as if it
were an Asset Sale. In addition, the fair market value (as determined in good
faith by the Board of Directors of the Company) of such properties and assets of
the Company or the Restricted Subsidiaries deemed to be sold shall be deemed to
be Net Cash Proceeds for purposes of this covenant.
Notice of each Net Proceeds Offer pursuant to this Section
4.12 will be mailed or caused to be mailed, by first class mail, by the Company
within 30 days following the Net Proceeds Offer Trigger Date to all Holders at
their last registered addresses, with a copy to the Trustee. The notice shall
contain all instructions and materials necessary to enable such Holders to
tender Securities pursuant to the Net Proceeds Offer and shall state the
following terms:
(1) that the Net Proceeds Offer is being made pursuant to
Section 4.12 and that all Securities tendered in whole or in part in
integral multiples of $1,000 will be accepted for payment; PROVIDED,
HOWEVER, that if the principal amount of Securities tendered in a Net
Proceeds Offer exceeds the aggregate amount of the Net Cash Proceeds
Offer Amount, the Company shall select the Securities to be purchased
on a PRO RATA basis;
(2) the purchase price (including the amount of accrued
interest, if any) and the Net Proceeds Offer Payment Date (which shall
be at least 20 Business Days from the date of mailing of notice of such
Net Proceeds Offer, or such longer period as required by law);
(3) that any Security not tendered will continue to
accrue interest;
(4) that, unless the Company defaults in making payment
therefor, any Security accepted for payment
<PAGE> 71
pursuant to the Net Proceeds Offer shall cease to accrue interest after
the Net Proceeds Offer Payment Date;
(5) that Holders electing to have a Security purchased
pursuant to a Net Proceeds Offer will be required to surrender the
Security, with the form entitled "Option of Holder to Elect Purchase"
on the reverse of the Security completed, to the Paying Agent at the
address specified in the notice prior to the close of business on the
Net Proceeds Offer Payment Date;
(6) that Holders will be entitled to withdraw their
election if the Paying Agent receives, not later than the Business Day
prior to the Net Proceeds Offer Payment Date, a facsimile transmission
or letter setting forth the name of the Holder, the principal amount of
the Security the Holder delivered for purchase and a statement that
such Holder is withdrawing his election to have such Security
purchased; and
(7) that Holders whose Securities are purchased only in
part will be issued new Securities in a principal amount equal to the
unpurchased portion of the Securities surrendered.
On or before the Net Proceeds Offer Payment Date, the Company
shall (i) accept for payment Securities or portions thereof tendered pursuant to
the Net Proceeds Offer which are to be purchased in accordance with item (1)
above, (ii) deposit with the Paying Agent in accordance with Section 2.14 U.S.
Legal Tender sufficient to pay the purchase price plus accrued interest, if any,
of all Securities to be purchased and (iii) deliver to the Trustee Securities so
accepted together with an Officers' Certificate stating the Securities or
portions thereof being purchased by the Company. The Paying Agent shall promptly
mail to the Holders of Securities so accepted payment in an amount equal to the
purchase price plus accrued interest, if any. For purposes of this Section 4.12,
the Trustee shall act as the Paying Agent.
<PAGE> 72
The Company shall and shall cause its Subsidiaries to comply
with all tender offer rules under state and Federal securities laws, including,
but not limited to, Section 14(e) under the Exchange Act and Rule 14e-1
thereunder, to the extent applicable to such offer. To the extent that the
provisions of any securities laws or regulations conflict with the foregoing
provisions of this Indenture, the Company shall comply with the applicable
securities laws and regulations and shall not be deemed to have breached its
obligations under the foregoing provisions of this Indenture by virtue thereof.
SECTION 4.13. LIMITATION ON DIVIDEND AND OTHER PAYMENT RESTRICTIONS AFFECTING
RESTRICTED SUBSIDIARIES.
The Company will not, and will not cause or permit any of the
Restricted Subsidiaries to, directly or indirectly, create or otherwise cause or
permit to exist or become effective any encumbrance or restriction on the
ability of any Restricted Subsidiary to (a) pay dividends or make any other
distributions on or in respect of its Capital Stock; (b) make loans or advances
or to pay any Indebtedness or other obligation owed to the Company or any other
Restricted Subsidiary; or (c) transfer any of its property or assets to the
Company or any other Restricted Subsidiary, except for such encumbrances or
restrictions existing under or by reasons of: (1) applicable law; (2) this
Indenture; (3) customary non-assignment provisions of any contract or any lease
governing a leasehold interest of any Restricted Subsidiary; (4) any instrument
governing Acquired Indebtedness, which encumbrance or restriction is not
applicable to any Person, or the properties or assets of any Person, other than
the Person or the properties or assets of the Person so acquired; (5) agreements
existing on the Issue Date to the extent and in the manner such agreements are
in effect on the Issue Date; (6) any other agreement entered into after the
Issue Date which contains encumbrances and restrictions which are not materially
more restrictive with respect to any Restricted Subsidiary than those in effect
with respect to such Restricted Subsidiary pursuant to agreements as in effect
on the Issue Date; (7) any instrument governing Indebtedness of a Foreign
Restricted
<PAGE> 73
Subsidiary; PROVIDED that after giving effect to the imposition of such
encumbrance or restriction, the Company would be able to incur $1.00 of
additional Indebtedness (other than Permitted Indebtedness) in compliance with
Section 4.03; (8) customary restrictions on the transfer of any property or
assets arising under a security agreement governing a Lien permitted under
Section 4.15 hereof; (9) any agreement governing Refinancing Indebtedness
incurred to Refinance the Indebtedness issued, assumed or incurred pursuant to
an agreement referred to in clause (2), (4) or (5) above; PROVIDED, HOWEVER,
that the provisions relating to such encumbrance or restriction contained in any
such Refinancing Indebtedness are not materially more restrictive than the
provisions relating to such encumbrance or restriction contained in agreements
referred to in such clause (2), (4), (5) or (7); and (10) any agreement
governing the sale or disposition of any Restricted Subsidiary which restricts
dividends and distributions pending such sale or disposition.
SECTION 4.14. LIMITATION ON PREFERRED STOCK OF RESTRICTED SUBSIDIARIES.
The Company will not permit any of the Restricted Subsidiaries
to issue any Preferred Stock (other than to the Company or to a Restricted
Subsidiary) or permit any Person (other than the Company or a Restricted
Subsidiary) to own any Preferred Stock of any Restricted Subsidiary.
SECTION 4.15. LIMITATION ON LIENS.
The Company will not, and will not cause or permit any of the
Restricted Subsidiaries to, directly or indirectly, create, incur, assume or
permit or suffer to exist any Liens of any kind against or upon any property or
assets of the Company or any of the Restricted Subsidiaries whether owned on the
Issue Date or acquired after the Issue Date, or any proceeds therefrom, or
assign or otherwise convey any right to receive income or profits therefrom
unless (i) in the case of Liens securing Indebtedness that is expressly
subordinate or junior in right of payment to the Notes, the Notes are secured by
a Lien on such property, assets or proceeds that is senior in
<PAGE> 74
priority to such Liens and (ii) in all other cases, the Notes are equally and
ratably secured, except for (A) Liens existing as of the Issue Date to the
extent and in the manner such Liens are in effect on the Issue Date; (B) Liens
securing Senior Debt and Liens securing Guarantor Senior Debt; (C) Liens
securing the Notes and any Guarantees; (D) Liens in favor of the Company or a
Guarantor; (E) Liens securing Refinancing Indebtedness which is incurred to
Refinance any Indebtedness which Refinancing Indebtedness has been secured by a
Lien permitted under this Indenture and which has been incurred in accordance
with the provisions of this Indenture; PROVIDED, HOWEVER, that such Liens do not
extend to or cover any property or assets of the Company or any of the
Restricted Subsidiaries not securing the Indebtedness so Refinanced; and (F)
Permitted Liens.
SECTION 4.16. [INTENTIONALLY OMITTED]
SECTION 4.17. PROHIBITION ON INCURRENCE OF SENIOR SUBORDINATED DEBT.
The Company will not, and will not permit any Guarantor to,
incur or suffer to exist Indebtedness that is senior in right of payment to the
Securities or the Guarantee of such Guarantor and subordinate in right of
payment to any other Indebtedness of the Company or such Guarantor, as the case
may be.
SECTION 4.18. LIMITATIONS ON TRANSACTIONS WITH AFFILIATES.
(a) The Company will not, and will not permit any of the
Restricted Subsidiaries to, directly or indirectly, enter into or permit to
exist any transaction or series of related transactions (including, without
limitation, the purchase, sale, lease or exchange of any property or the
rendering of any service) with, or for the benefit of, any of its Affiliates
(each, an "Affiliate Transaction"), other than (x) Affiliate Transactions
permitted under paragraph (b) below and (y) Affiliate Transactions on terms that
are not materially less favorable than those that would have reasonably been
expected in a comparable transaction at such time on an arm's-
<PAGE> 75
length basis from a Person that is not an Affiliate of the Company or such
Restricted Subsidiary. All Affiliate Transactions (and each series of related
Affiliate Transactions which are similar or part of a common plan) involving
aggregate payments or other property with a fair market value in excess of $1.0
million shall be approved by the Board of Directors of the Company or such
Restricted Subsidiary, as the case may be, such approval to be evidenced by a
Board Resolution stating that such Board of Directors has determined that such
transaction complies with the foregoing provisions. If the Company or any
Restricted Subsidiary enters into an Affiliate Transaction (or series of related
Affiliate Transactions related to a common plan) that involves an aggregate fair
market value of more than $10.0 million, the Company or such Restricted
Subsidiary, as the case may be, shall, prior to the consummation thereof, obtain
a favorable opinion as to the fairness of such transaction or series of related
transactions to the Company or the relevant Restricted Subsidiary, as the case
may be, from a financial point of view, from an Independent Financial Advisor
and file the same with the Trustee.
(b) The restrictions set forth in clause (a) shall not
apply to (i) employment, consulting and compensation arrangements and agreements
of the Company or any Restricted Subsidiary consistent with past practice or
approved by a majority of the disinterested members of the Board of Directors
(or a committee comprised of disinterested directors); (ii) reasonable fees and
compensation paid to and indemnity provided on behalf of, officers, directors,
employees, consultants or agents of the Company or any Restricted Subsidiary as
determined in good faith by the Company's Board of Directors or senior
management; (iii) consulting fees paid by the Company consistent with past
practice; (iv) transactions exclusively between or among the Company and any of
the Restricted Subsidiaries or exclusively between or among such Restricted
Subsidiaries, PROVIDED such transactions are not otherwise prohibited by this
Indenture; and (v) Restricted Payments or Permitted Investments permitted by
this Indenture.
<PAGE> 76
SECTION 4.19. ISSUANCE OF SUBSIDIARY GUARANTEES.
If (a) any Domestic Wholly Owned Restricted Subsidiary incurs
any Indebtedness (other than Indebtedness owing to the Company or a Restricted
Subsidiary) or (b) any Restricted Subsidiary (including any Foreign Restricted
Subsidiary) guarantees any Indebtedness (other than Indebtedness owing to the
Company or a Restricted Subsidiary) of the Company or any of its Restricted
Subsidiaries (other than a Subsidiary of such Restricted Subsidiary) then, in
either case, the Company shall cause such Domestic Wholly Owned Restricted
Subsidiary or such Restricted Subsidiary, as the case may be, to (i) execute and
deliver to the Trustee a supplemental indenture in form reasonably satisfactory
to the Trustee pursuant to which such Domestic Wholly Owned Restricted
Subsidiary or such Restricted Subsidiary, as the case may be, shall
unconditionally guarantee (each, a "Guarantee") all of the Company's obligations
under the Securities and this Indenture on the terms set forth in Article Ten
and (ii) deliver to the Trustee an Opinion of Counsel (which may contain
customary exceptions) that such supplemental indenture has been duly authorized,
executed and delivered by such Domestic Wholly Owned Restricted Subsidiary or
such Restricted Subsidiary, as the case may be, and constitutes a legal, valid,
binding and enforceable obligation of such Domestic Wholly Owned Restricted
Subsidiary or such Restricted Subsidiary, as the case may be. Thereafter, such
Domestic Wholly Owned Restricted Subsidiary or such Restricted Subsidiary, as
the case may be, shall be a Guarantor for all purposes of this Indenture. The
Company may cause any other Restricted Subsidiary of the Company to issue a
Guarantee and become a Guarantor.
SECTION 4.20. [INTENTIONALLY OMITTED].
SECTION 4.21. CONDUCT OF BUSINESS.
The Company will not, and will not permit any Restricted
Subsidiary to, engage in any businesses which are not either (i) the same,
similar or related to the businesses in which the Company and the Restricted
Subsidiaries are
<PAGE> 77
engaged on the Issue Date, (ii) Permitted Investments or (iii) businesses
acquired through an acquisition after the Issue Date which are not material to
the Company and the Restricted Subsidiaries, taken as a whole.
SECTION 4.22. PAYMENTS FOR CONSENT.
The Company will not, and will not cause or permit any of its
Subsidiaries to, directly or indirectly, pay or cause to be paid any
consideration, whether by way of interest, fee or otherwise, to any Holder of
any Securities for or as an inducement to any consent, waiver or amendment of
any of the terms or provisions of this Indenture, the Securities or the
Guarantees unless such consideration is offered to be paid to all Holders of the
Securities who so consent, waive or agree to amend in the time frame set forth
in solicitation documents relating to such consent, waiver or agreement.
SECTION 4.23. LIMITATION ON DESIGNATIONS OF UNRESTRICTED SUBSIDIARIES.
The Company may designate any Subsidiary of the Company (other
than a Subsidiary of the Company which owns Capital Stock of a Restricted
Subsidiary) as an "Unrestricted Subsidiary" under this Indenture (a
"Designation") only if:
(a) no Default shall have occurred and be continuing at
the time of or after giving effect to such Designation; and
(b) the Company would be permitted under this Indenture
to make an Investment at the time of Designation (assuming the
effectiveness of such Designation) in an amount (the "Designation
Amount") equal to the sum of (i) the fair market value of the Capital
Stock of such Subsidiary owned by the Company and/or any of the
Restricted Subsidiaries on such date and (ii) the aggregate amount of
Indebtedness of such Subsidiary owed to the Company and the Restricted
Subsidiaries on such date; and
<PAGE> 78
(c) the Company would be permitted to incur $1.00 of
additional Indebtedness (other than Permitted Indebtedness) pursuant to
Section 4.03 hereof at the time of Designation (assuming the
effectiveness of such Designation).
In the event of any such Designation, the Company shall be
deemed to have made an Investment constituting a Restricted Payment in the
Designation Amount pursuant to Section 4.04 hereof for all purposes of this
Indenture. The Company shall not, and shall not permit any Restricted Subsidiary
to, at any time (x) provide direct or indirect credit support for or a guarantee
of any Indebtedness of any Unrestricted Subsidiary (including any undertaking
agreement or instrument evidencing such Indebtedness), (y) be directly or
indirectly liable for any Indebtedness of any Unrestricted Subsidiary or (z) be
directly or indirectly liable for any Indebtedness which provides that the
holder thereof may (upon notice, lapse of time or both) declare a default
thereon or cause the payment thereof to be accelerated or payable prior to its
final scheduled maturity upon the occurrence of a default with respect to any
Indebtedness of any Unrestricted Subsidiary (including any right to take
enforcement action against such Unrestricted Subsidiary), except, in the case of
clause (x) or (y), to the extent permitted under Section 4.04 hereof.
The Company may revoke any Designation of a Subsidiary as an
Unrestricted Subsidiary ("Revocation"), whereupon such Subsidiary shall then
constitute a Restricted Subsidiary, if
(a) no Default shall have occurred and be continuing at
the time and after giving effect to such Revocation; and
(b) all Liens and Indebtedness of such Unrestricted
Subsidiary outstanding immediately following such Revocation would, if
incurred at such time, have been permitted to be incurred for all
purposes of this Indenture.
<PAGE> 79
All Designations and Revocations must be evidenced by an
Officers' Certificate of the Company delivered to the Trustee certifying
compliance with the foregoing provisions.
SECTION 4.24. CHANGE OF CONTROL.
(a) Upon the occurrence of a Change of Control, the
Company shall within 30 days of the Change of Control either (i) repay in full
and terminate all commitments under all Indebtedness under the Credit Agreement
and all other Senior Debt the terms of which require repayment upon a Change of
Control or offer to repay in full and terminate all commitments under all
Indebtedness under the Credit Agreement and all other such Senior Debt and to
repay the Indebtedness owed to each lender which has accepted such offer or (ii)
obtain the requisite consents under the Credit Agreement and all other Senior
Debt to permit the repurchase of the Securities as provided below. After the
Company complies with the covenant in the immediately preceding sentence, the
Company shall make an offer to purchase (a "Change of Control Offer"), and shall
purchase, on a Business Day not more than 60 nor less than 30 days following the
occurrence of the Change of Control (the "Change of Control Payment Date"), all
of the then outstanding Securities at a purchase price equal to 101% of the
principal amount thereof, plus accrued and unpaid interest, if any, thereon to
the Change of Control Payment Date. The Change of Control Offer shall remain
open for 20 Business Days (or such longer period as may be required by law) and
until the close of business on the Change of Control Payment Date.
(b) Within 30 days following the date upon which the
Change of Control occurred (the "Change of Control Date"), the Company shall
mail, or cause to be mailed, by first class mail, a notice to each Holder, with
a copy to the Trustee, which notice shall govern the terms of the Change of
Control Offer. The notice to the Holders shall contain all instructions and
materials necessary to enable such Holders to tender Securities pursuant to the
Change of Control Offer. Such notice shall state:
<PAGE> 80
(1) that the Change of Control Offer is being made
pursuant to this Section 4.24 and that all Securities tendered and not
withdrawn will be accepted for payment;
(2) the purchase price (including the amount of accrued
interest) and the Change of Control Payment Date;
(3) that any Security not tendered will continue to
accrue interest;
(4) that, unless the Company defaults in making payment
therefor, any Security accepted for payment pursuant to the Change of
Control Offer shall cease to accrue interest after the Change of
Control Payment Date;
(5) that Holders electing to have a Security purchased
pursuant to a Change of Control Offer will be required to surrender the
Security, with the form entitled "Option of Holder to Elect Purchase"
on the reverse of the Security completed, to the Paying Agent at the
address specified in the notice prior to the close of business on the
third Business Day prior to the Change of Control Payment Date;
(6) that Holders will be entitled to withdraw their
election if the Paying Agent receives, not later than the Business Day
prior to the Change of Control Payment Date, a facsimile transmission
or letter setting forth the name of the Holder, the principal amount of
the Securities the Holder delivered for purchase and a statement that
such Holder is withdrawing his election to have such Securities
purchased;
(7) that Holders whose Securities are purchased only in
part will be issued new Securities in a principal amount equal to the
unpurchased portion of the Securities surrendered; and
(8) the circumstances and relevant facts regarding such
Change of Control.
<PAGE> 81
On or before the Change of Control Payment Date, the Company
shall (i) accept for payment Securities or portions thereof tendered pursuant to
the Change of Control Offer, (ii) deposit with the Paying Agent in accordance
with Section 2.14 U.S. Legal Tender sufficient to pay the purchase price plus
accrued interest, if any, of all Securities so tendered and (iii) deliver to the
Trustee Securities so accepted together with an Officers' Certificate stating
the Securities or portions thereof being purchased by the Company. Upon receipt
by the Paying Agent of the monies specified in clause (ii) above and a copy of
the Officers' Certificate specified in clause (iii) above, the Paying Agent
shall promptly mail to the Holders of Securities so accepted payment in an
amount equal to the purchase price plus accrued interest, if any, and the
Trustee shall promptly authenticate and mail to such Holders new Securities
equal in principal amount to any unpurchased portion of the Securities
surrendered. Any Securities not so accepted shall be promptly mailed by the
Company to the Holder thereof. For purposes of this Section 4.24, the Trustee
shall act as the Paying Agent.
Any amounts remaining after the purchase of all validly
tendered and not validly withdrawn Securities pursuant to a Change of Control
Offer shall be returned by the Trustee to the Company.
The Company shall and shall cause its Subsidiaries to comply
with all tender offer rules under state and Federal securities laws, including,
but not limited to, Section 14(e) under the Exchange Act and Rule 14e-1
thereunder, to the extent applicable to such offer. To the extent that the
provisions of any securities laws or regulations conflict with this Section
4.24, the Company shall comply with the applicable securities laws and
regulations and shall not be deemed to have breached its obligations under this
Section 4.24 by virtue thereof.
<PAGE> 82
ARTICLE FIVE
SUCCESSOR CORPORATION
SECTION 5.01. MERGERS, CONSOLIDATIONS AND SALES OF ASSETS.
(a) The Company will not, in a single transaction or
series of related transactions, consolidate or merge with or into any Person, or
sell, assign, transfer, lease, convey or otherwise dispose of (or cause or
permit any Restricted Subsidiary to sell, assign, transfer, lease, convey or
otherwise dispose of) all or substantially all of the Company's assets
(determined on a consolidated basis for the Company and the Restricted
Subsidiaries) whether as an entirety or substantially as an entirety to any
Person unless: (i) either (1) the Company shall be the surviving or continuing
corporation or (2) the Person (if other than the Company) formed by such
consolidation or into which the Company is merged or the Person which acquires
by sale, assignment, transfer, lease, conveyance or other disposition the
properties and assets of the Company and the Restricted Subsidiaries
substantially as an entirety (the "Surviving Entity") (x) shall be a corporation
organized and validly existing under the laws of the United States or any State
thereof or the District of Columbia and (y) shall expressly assume, by
supplemental indenture (in form and substance reasonably satisfactory to the
Trustee), executed and delivered to the Trustee, the due and punctual payment of
the principal of, and premium, if any, and interest on all of the Securities and
the performance of every covenant of the Securities, this Indenture and the
Registration Rights Agreement on the part of the Company to be performed or
observed; (ii) immediately after giving effect to such transaction and the
assumption contemplated by clause (i)(2)(y) above (including giving effect to
any Indebtedness and Acquired Indebtedness incurred or anticipated to be
incurred in connection with or in respect of such transaction), the Company or
such Surviving Entity, as the case may be, shall be able to incur at least $1.00
of additional Indebtedness (other than Permitted Indebtedness) pursuant to
Section 4.03 hereof;
<PAGE> 83
(iii) immediately before and immediately after giving effect to such transaction
and the assumption contemplated by clause (i)(2)(y) above (including, without
limitation, giving effect to any Indebtedness and Acquired Indebtedness incurred
or anticipated to be incurred and any Lien granted in connection with or in
respect of the transaction), no Default or Event of Default shall have occurred
or be continuing; and (iv) the Company or the Surviving Entity shall have
delivered to the Trustee an Officers' Certificate and an Opinion of Counsel,
each stating that such consolidation, merger, sale, assignment, transfer, lease,
conveyance or other disposition and, if a supplemental indenture is required in
connection with such transaction, such supplemental indenture comply with the
applicable provisions of this Indenture and that all conditions precedent in
this Indenture relating to such transaction have been satisfied.
(b) For purposes of the foregoing, the transfer (by
lease, assignment, sale or otherwise, in a single transaction or series of
transactions) of all or substantially all of the properties or assets of one or
more Restricted Subsidiaries, the Capital Stock of which constitutes all or
substantially all of the properties and assets of the Company, shall be deemed
to be the transfer of all or substantially all of the properties and assets of
the Company.
(c) No Guarantor (other than any Guarantor whose
Guarantee is to be released in accordance with the terms of the Guarantee and
this Indenture in connection with any transaction complying with the provisions
of Section 4.12 will, and the Company will not cause or permit any Guarantor to,
consolidate with or merge with or into any Person other than the Company or any
other Guarantor unless: (i) the entity formed by or surviving any such
consolidation or merger (if other than the Guarantor) is a corporation organized
and existing under the laws of the United States or any State thereof or the
District of Columbia; (ii) such entity assumes by supplemental indenture all of
the obligations of the Guarantor under this Indenture, such Guarantor's
Guarantee and the Registration Rights Agreement; (iii) immediately after giving
effect to such transaction, no Default or Event of Default shall have occurred
<PAGE> 84
and be continuing; (iv) immediately after giving effect to such transaction and
the use of any net proceeds therefrom on a PRO FORMA basis, the Company could
satisfy the provisions of clause (a)(ii) of this Section 5.01; and (v) the
Company shall have delivered to the Trustee an Officers' Certificate and Opinion
of Counsel, each stating that such consolidation or merger and, if a
supplemental indenture is required in connection with such transaction, such
supplemental indenture comply with the applicable provisions of this Indenture
and that all conditions precedent in this Indenture relating to such transaction
have been satisfied.
SECTION 5.02. SUCCESSOR CORPORATION SUBSTITUTED.
In accordance with the foregoing, upon any such consolidation,
merger, conveyance, lease or transfer of all or substantially all of the assets
of the Company in which the Company is not the continuing corporation, the
Surviving Entity formed by such consolidation or into which the Company is
merged or to which such conveyance, lease or transfer is made shall succeed to,
and be substituted for, and may exercise every right and power of, the Company
under this Indenture and the Securities with the same effect as if such
successor had been named as the Company herein, and thereafter the predecessor
corporation will be relieved of all further obligations and covenants under this
Indenture, the Securities and the Registration Rights Agreement; PROVIDED that
solely for purposes of computing amounts described in subclause (iii) of Section
4.04, any such Surviving Entity shall only be deemed to have succeeded to and be
substituted for the Company with respect to periods subsequent to the effective
time of such merger, consolidation or transfer of assets.
<PAGE> 85
ARTICLE SIX
DEFAULT AND REMEDIES
SECTION 6.01. EVENTS OF DEFAULT.
An "Event of Default" occurs if:
(1) the Company fails to pay interest on any Security for
a period of 30 days after the same becomes due and payable (whether or
not such payment shall be prohibited by Article Twelve); or
(2) the Company fails to pay the principal of any
Security, when such principal becomes due and payable, whether at
maturity, upon redemption or otherwise (including the failure to make a
payment to purchase Securities tendered pursuant to a Change of Control
Offer or Net Proceeds Offer) (whether or not such payment shall be
prohibited by Article Twelve); or
(3) the Company or any Guarantor defaults in the
observance or performance of any other covenant or agreement contained
in this Indenture, the Securities or any Guarantee, which default
continues for a period of 60 days after (x) the Company receives
written notice specifying the default and requiring the Company to
remedy the same from the Trustee or (y) the Company and the Trustee
receive such a notice from Holders of at least 25% in principal amount
of outstanding Securities (except in the case of a default with respect
to Article Five, which will constitute an Event of Default with such
notice requirement but without such passage of time requirement); or
(4) the Company or a Restricted Subsidiary defaults under
any mortgage, indenture or instrument under which there may be issued
or by which there may be secured or evidenced any Indebtedness of the
Company or of any Restricted Subsidiary (or the payment of which is
<PAGE> 86
guaranteed by the Company or any Restricted Subsidiary) which default
(a) is caused by a failure to pay principal of such Indebtedness after
any applicable grace period provided in such Indebtedness on the date
of such default (a "principal payment default"), or (b) results in the
acceleration of such Indebtedness prior to its express maturity (and
such acceleration is not rescinded, or such Indebtedness is not repaid,
within 30 days) and, in each case, the principal amount of any such
Indebtedness, together with the principal amount of any other such
Indebtedness under which there has been a principal payment default or
the maturity of which has been so accelerated (and such acceleration is
not rescinded, or such Indebtedness is not repaid, within 30 days),
aggregates $7.5 million; or
(5) the Company or any of its Restricted Subsidiaries (A)
admits in writing its inability to pay its debts generally as they
become due, (B) commences a voluntary case or proceeding under any
Bankruptcy Law with respect to itself, (C) consents to the entry of a
judgment, decree or order for relief against it in an involuntary case
or proceeding under any Bankruptcy Law, (D) consents to the appointment
of a Custodian of it or for substantially all of its property, (E)
consents to or acquiesces in the institution of a bankruptcy or an
insolvency proceeding against it, (F) makes a general assignment for
the benefit of its creditors, or (G) takes any corporate action to
authorize or effect any of the foregoing; or
(6) a court of competent jurisdiction enters a judgment,
decree or order for relief in respect of the Company or any of its
Significant Subsidiaries in an involuntary case or proceeding under any
Bankruptcy Law, which shall (A) approve as properly filed a petition
seeking reorganization, arrangement, adjustment or composition in
respect of the Company or any of its Significant Subsidiaries, (B)
appoint a Custodian of the Company or any of its Significant
Subsidiaries or for substantially all of any of their property or (C)
order
<PAGE> 87
the winding-up or liquidation of its affairs; and such judgment, decree
or order shall remain unstayed and in effect for a period of 60
consecutive days; or
(7) one or more judgments, orders or decrees of any court
or regulatory or administrative agency of competent jurisdiction for
the payment of money in excess of $7.5 million not covered by adequate
insurance, either individually or in the aggregate, shall be entered
against the Company or any Restricted Subsidiary of the Company or any
of their respective properties and shall not be discharged or fully
bonded and there shall have been a period of 60 days after the date on
which any period for appeal has expired and during which a stay of
enforcement of such judgment, order or decree shall not be in effect;
or
(8) any Guarantee of a Guarantor ceases to be in full
force and effect, or any Guarantee of a Guarantor is declared to be
null and void and unenforceable or any Guarantee of a Guarantor is
found to be invalid or any Guarantor denies its liability under its
Guarantee (other than by reason of release of a Guarantor in accordance
with the terms of this Indenture).
The Trustee shall, within 30 days after the occurrence of any
Default actually known to a Responsible Officer of the Trustee, give to the
holders of Securities notice of such Default; PROVIDED that, except in the case
of a Default in the payment of principal of or interest on any of the
Securities, the Trustee shall be protected in withholding such notice if and so
long as a Responsible Officer of the Trustee in good faith determines that the
withholding of such notice is in the interest of the Holders of Securities.
SECTION 6.02. ACCELERATION.
If an Event of Default (other than an Event of Default
specified in clause (5) or (6) above) occurs and is continuing, then the Trustee
or the Holders of not less than 25% in aggregate principal amount of the then
outstanding
<PAGE> 88
Securities may declare the unpaid principal of, premium, if any, and accrued and
unpaid interest on, all the Securities then outstanding to be immediately due
and payable, by a notice in writing to the Company (and to the Trustee, if given
by Holders) specifying the respective Event(s) of Default and that it is a
"notice of acceleration" and upon such declaration such principal amount,
premium, if any, and accrued and unpaid interest will become immediately due and
payable. If an Event of Default specified in clause (5) or (6) above occurs and
is continuing, all unpaid principal of, and premium, if any, and accrued and
unpaid interest on, the Securities then outstanding will IPSO FACTO become and
be immediately due and payable without any declaration or other act on the part
of the Trustee or any Holder.
At any time after a declaration of acceleration with respect
to the Securities as described in the preceding paragraph, the Holders of a
majority in principal amount of the then outstanding Securities may rescind and
cancel such declaration and its consequences (a) if the rescission would not
conflict with any judgment or decree, (b) if all existing Events of Default have
been cured or waived except nonpayment of principal or interest that has become
due solely because of the acceleration, (c) to the extent the payment of such
interest is lawful, interest on overdue installments of interest and overdue
principal, which has become due otherwise than by such declaration of
acceleration, has been paid, (d) if the Company has paid the Trustee its
reasonable compensation and reimbursed the Trustee for its reasonable expenses,
disbursements and advances and (e) in the event of the cure or waiver of an
Event of Default of the type described in clauses (5) and (6) of the description
of Events of Default above, the Trustee shall have received an Officers'
Certificate and an Opinion of Counsel that such Event of Default has been cured
or waived. No such rescission shall affect any subsequent Default or impair any
right consequent thereto.
SECTION 6.03. OTHER REMEDIES.
If an Event of Default occurs and is continuing, the Trustee
may pursue any available remedy by proceeding at law or
<PAGE> 89
in equity to collect the payment of principal of or interest on the Securities
or to enforce the performance of any provision of the Securities, this Indenture
or any Guarantee.
The Trustee may maintain a proceeding even if it does not
possess any of the Securities or does not produce any of them in the proceeding.
A delay or omission by the Trustee or any Securityholder in exercising any right
or remedy accruing upon an Event of Default shall not impair the right or remedy
or constitute a waiver of or acquiescence in the Event of Default. No remedy is
exclusive of any other remedy. All available remedies are cumulative to the
extent permitted by law.
SECTION 6.04. WAIVER OF PAST DEFAULTS.
Subject to Sections 6.02, 6.07 and 9.02, the Holders of not
less than a majority in principal amount of the then outstanding Securities by
written notice to the Trustee may waive an existing Default or Event of Default
and its consequences, except a Default in the payment of principal of, premium
or interest on any Security as specified in clauses (1) and (2) of Section 6.01.
The Company shall deliver to the Trustee an Officers' Certificate stating that
the requisite percentage of Holders have consented to such waiver and attaching
copies of such consents upon which the Trustee may conclusively rely. When a
Default or Event of Default is waived, it is cured and ceases.
SECTION 6.05. CONTROL BY MAJORITY.
The Holders of not less than a majority in principal amount of
the outstanding Securities may direct the time, method and place of conducting
any proceeding for any remedy available to the Trustee or exercising any trust
or power conferred on it. Subject to Section 7.01, however, the Trustee may
refuse to follow any direction that conflicts with any law or this Indenture,
that the Trustee determines may be unduly prejudicial to the rights of another
Securityholder, or that may involve the Trustee in personal liability; PROVIDED
that
<PAGE> 90
the Trustee may take any other action deemed proper by the Trustee which is not
inconsistent with such direction.
In the event the Trustee takes any action or follows any
direction pursuant to this Indenture, the Trustee shall be entitled to
indemnification from the Company satisfactory to it in its sole discretion
against any fees, loss, liability, cost or expense caused by taking such action
or following such direction.
SECTION 6.06. LIMITATION ON SUITS.
A Securityholder may not pursue any remedy with respect to
this Indenture, the Securities or any Guarantee unless:
(1) the Holder gives to the Trustee written notice of a
continuing Event of Default;
(2) the Holder or Holders of at least 25% in principal
amount of the outstanding Securities make a written request to the
Trustee to pursue the remedy;
(3) such Holder or Holders offer and, if requested,
provide to the Trustee indemnity satisfactory to the Trustee against
any loss, liability or expense;
(4) the Trustee does not comply with the request within
30 days after receipt of the request and the offer and, if requested,
the provision of indemnity; and
(5) during such 30-day period the Holder or Holders of a
majority in principal amount of the outstanding Securities do not give
the Trustee a direction which, in the opinion of the Trustee, is
inconsistent with the request.
A Securityholder may not use this Indenture to prejudice the
rights of another Securityholder or to obtain a preference or priority over such
other Securityholder.
<PAGE> 91
SECTION 6.07. RIGHTS OF HOLDERS TO RECEIVE PAYMENT.
Notwithstanding any other provision of this Indenture, the
right of any Holder to receive payment of principal of, premium and interest on
a Security, on or after the respective due dates expressed in such Security, or
to bring suit for the enforcement of any such payment on or after such
respective dates, shall not be impaired or affected without the consent of the
Holder.
SECTION 6.08. COLLECTION SUIT BY TRUSTEE.
If an Event of Default in payment of principal, premium or
interest specified in clause (1) or (2) of Section 6.01 occurs and is
continuing, the Trustee may recover judgment in its own name and as trustee of
an express trust against the Company or any other obligor on the Securities for
the whole amount of principal and accrued interest remaining unpaid, together
with interest on overdue principal and, to the extent that payment of such
interest is lawful, interest on overdue installments of interest, in each case
at the rate per annum borne by the Securities and such further amount as shall
be sufficient to cover the costs and expenses of collection, including the
reasonable compensation, expenses, disbursements and advances of the Trustee,
its agents and counsel.
SECTION 6.09. TRUSTEE MAY FILE PROOFS OF CLAIM.
The Trustee may file such proofs of claim and other papers or
documents as may be necessary or advisable in order to have the claims of the
Trustee (including any claim for the reasonable compensation, expenses, legal
fees, disbursements and advances of the Trustee, its agents, nominees,
custodians, counsel, accountants and experts) and the Securityholders allowed in
any judicial proceedings relating to the Company, its creditors or its property
and shall be entitled and empowered to collect and receive any monies or other
property payable or deliverable on any such claims and to distribute the same,
and any Custodian in any such judicial proceedings is hereby authorized by each
Securityholder to make such payments to the Trustee and, in the event that the
Trustee shall consent
<PAGE> 92
to the making of such payments directly to the Securityholders, to pay to the
Trustee any amount due to it for the reasonable compensation, expenses, legal
fees, disbursements and advances of the Trustee, its agents, nominees,
custodians and counsel, and any other amounts due the Trustee under Section
7.07. Nothing herein contained shall be deemed to authorize the Trustee to
authorize or consent to or accept or adopt on behalf of any Securityholder any
plan of reorganization, arrangement, adjustment or composition affecting the
Securities or the rights of any Holder thereof, or to authorize the Trustee to
vote in respect of the claim of any Securityholder in any such proceeding.
SECTION 6.10. PRIORITIES.
If the Trustee collects any money or property pursuant to this
Article Six, it shall pay out the money or property in the following order:
First: to the Trustee for amounts owing under Section 7.07;
Second: if the Holders are forced to proceed against the
Company, a Guarantor or any other obligor on the Securities directly
without the Trustee, to Holders for their collection costs;
Third: to Holders for amounts due and unpaid on the Securities
for principal, premium and interest, ratably, without preference or
priority of any kind, according to the amounts due and payable on the
Securities for principal, premium and interest, respectively; and
Fourth: to the Company or any Guarantors, as their respective
interests may appear.
The Trustee, upon prior notice to the Company, may fix a
record date and payment date for any payment to Securityholders pursuant to this
Section 6.10.
<PAGE> 93
SECTION 6.11. UNDERTAKING FOR COSTS.
In any suit for the enforcement of any right or remedy under
this Indenture or in any suit against the Trustee for any action taken or
omitted by it as Trustee, a court in its discretion may require the filing by
any party litigant in the suit of an undertaking to pay the costs of the suit,
and the court in its discretion may assess reasonable costs, including
reasonable attorneys' fees and expenses, against any party litigant in the suit,
having due regard to the merits and good faith of the claims or defenses made by
the party litigant. This Section 6.11 does not apply to a suit by the Trustee, a
suit by a Holder pursuant to Section 6.07, or a suit by a Holder or Holders of
more than 10% in principal amount of the outstanding Securities.
ARTICLE SEVEN
TRUSTEE
SECTION 7.01. Duties of Trustee.
(a) If an Event of Default actually known to a
Responsible Officer of the Trustee has occurred and is continuing, the Trustee
shall exercise such of the rights and powers vested in it by this Indenture and
use the same degree of care and skill in their exercise as a prudent person
would exercise or use under the circumstances in the conduct of his own affairs.
Subject to such provisions, the Trustee shall be under no obligation to exercise
any of its rights or powers under this Indenture at the request of any of the
holders of Securities, unless they shall have offered to the Trustee security
and indemnity satisfactory to it in its sole discretion.
(b) Except during the continuance of an Event of Default
actually known to a Responsible Officer of the Trustee:
(1) The Trustee need perform only those duties as are
specifically set forth herein and no others and no
<PAGE> 94
implied covenants or obligations shall be read into this Indenture
against the Trustee.
(2) In the absence of bad faith on its part, the Trustee
may conclusively rely, as to the truth of the statements and the
correctness of the opinions expressed therein, upon certificates or
opinions and such other documents delivered to it pursuant to Section
11.04 hereof furnished to the Trustee and conforming to the
requirements of this Indenture. However, the Trustee shall examine the
certificates and opinions to determine whether or not they conform to
the requirements of this Indenture.
(c) The Trustee may not be relieved from liability for
its own negligent action, its own negligent failure to act, or its own willful
misconduct, except that:
(1) This paragraph does not limit the effect of paragraph
(b) of this Section 7.01.
(2) The Trustee shall not be liable for any error of
judgment made in good faith by a Responsible Officer of the Trustee,
unless it is proved that the Trustee was negligent in ascertaining the
pertinent facts.
(3) The Trustee shall not be liable with respect to any
action it takes or omits to take in good faith in accordance with a
direction received by it pursuant to Section 6.05.
(d) No provision of this Indenture shall require the
Trustee to expend or risk its own funds or otherwise incur any financial
liability in the performance of any of its duties hereunder or to take or omit
to take any action under this Indenture or take any action at the request or
direction of Holders if it shall have reasonable grounds for believing that
repayment of such funds is not assured to it or it does not receive an indemnity
satisfactory to it in its sole discretion against such risk, liability, loss,
fee or expense which might be incurred by it in compliance with such request or
direction.
<PAGE> 95
(e) Every provision of this Indenture that in any way
relates to the Trustee is subject to this Section 7.01.
(f) The Trustee shall not be liable for interest on any
money received by it except as the Trustee may agree in writing with the
Company. Money held in trust by the Trustee need not be segregated from other
funds except to the extent required by law.
SECTION 7.02. RIGHTS OF TRUSTEE.
Subject to Section 7.01:
(a) The Trustee may conclusively rely and shall be
protected in acting or refraining from acting on any document believed
by it to be genuine and to have been signed or presented by the proper
Person. The Trustee need not investigate any fact or matter stated in
the document.
(b) Before the Trustee acts or refrains from acting, it
may require an Officers' Certificate and an Opinion of Counsel, which
shall conform to the provisions of Section 11.05. The Trustee shall not
be liable for any action it takes or omits to take in good faith in
reliance on such certificate or opinion.
(c) The Trustee may act through its attorneys, agents,
custodians and nominees and shall not be responsible for the misconduct
or negligence of any attorney, agent, custodian or nominee (other than
such a person who is an employee of the Trustee) appointed with due
care.
(d) The Trustee shall not be liable for any action it
takes or omits to take in good faith which it reasonably believes to be
authorized or within its rights or powers.
(e) The Trustee may consult with counsel and the advice
or opinion of such counsel as to matters of law shall be full and
complete authorization and protection
<PAGE> 96
from liability in respect of any action taken, omitted or suffered by
it hereunder in good faith and in accordance with the advice or opinion
of such counsel.
(f) The Trustee shall be under no obligation to exercise
any of the rights or powers vested in it by this Indenture at the
request, order or direction of any of the Holders pursuant to the
provisions of this Indenture, unless such Holders shall have offered to
the Trustee reasonable security or indemnity against the fees, costs,
expenses and liabilities which may be incurred therein or thereby.
(g) Except with respect to Section 4.01, the Trustee
shall not have any duty as to inquire as to the performance by the
Company of its covenants or obligations under this Indenture. The
Trustee shall not be deemed to have notice or any knowledge of any
matter (including without limitation defaults or events of default)
unless a Responsible Officer assigned to and working in the Trustee's
Corporate Trust Administration has actual knowledge thereof or unless
written notice thereof is received by the Trustee, attention: Corporate
Trust Administration and such notice references the Securities
generally, the Company or this Indenture.
SECTION 7.03. INDIVIDUAL RIGHTS OF TRUSTEE.
The Trustee in its individual or any other capacity may become
the owner or pledgee of Securities and may otherwise deal with the Company, its
Subsidiaries, any Guarantors and their respective Affiliates with the same
rights it would have if it were not Trustee. Any Agent may do the same with like
rights. However, the Trustee must comply with Sections 7.10 and 7.11.
SECTION 7.04. TRUSTEE'S DISCLAIMER.
The Trustee shall not be responsible for and makes no
representation as to the validity or adequacy of this Indenture or the
Securities, it shall not be accountable for the
<PAGE> 97
Company's use of the proceeds from the Securities, and it shall not be
responsible for any statement of the Company in this Indenture or any document
issued in connection with the sale of Securities (including without limitation
any preliminary or final offering memorandum) or any statement in the Securities
other than the Trustee's certificate of authentication. The Trustee makes no
representations with respect to the effectiveness or adequacy of this Indenture.
The Trustee shall not be responsible for independently ascertaining or
maintaining such validity, if any, and shall be fully protected in relying upon
certificates and opinions delivered to it in accordance with the terms of this
Indenture.
SECTION 7.05. NOTICE OF DEFAULT.
If a Default or an Event of Default occurs and is continuing
and a Responsible Officer of the Trustee receives actual notice of such event,
the Trustee shall mail to each Securityholder, as their names and addresses
appear on the Securityholder list described in Section 2.05, notice of the
uncured Default or Event of Default within 30 days after the Trustee receives
such notice. Except in the case of a Default or an Event of Default in payment
of principal of, premium or interest on, any Security, including the failure to
make payment on (i) the Change of Control Payment Date pursuant to a Change of
Control Offer or (ii) the Excess Proceeds Offer Payment Date pursuant to an
Excess Proceeds Offer, the Trustee may withhold the notice if and so long as the
board of directors, the executive committee, or a trust committee of directors,
of the Trustee in good faith determines that withholding the notice is in the
interest of the Securityholders.
SECTION 7.06. REPORTS BY TRUSTEE TO HOLDERS.
This Section 7.06 shall not be operative as a part of this
Indenture until this Indenture is qualified under the TIA, and, until such
qualification, this Indenture shall be construed as if this Section 7.06 were
not contained herein.
<PAGE> 98
Within 60 days after each May 15 of each year beginning with
1999, the Trustee shall, to the extent that any of the events described in TIA
ss. 313(a) occurred within the previous twelve months, but not otherwise, mail
to each Securityholder a brief report dated as of such date that complies with
TIA ss. 313(a). The Trustee also shall comply with TIA ss.ss. 313(b), 313(c) and
313(d).
A copy of each report at the time of its mailing to
Securityholders shall be mailed to the Company and filed with the SEC and each
securities exchange, if any, on which the Securities are listed.
The Company shall notify a Responsible Officer of the Trustee
if the Securities become listed on any securities exchange or of any delisting
thereof.
SECTION 7.07. COMPENSATION AND INDEMNITY.
The Company shall pay to the Trustee from time to time
reasonable compensation for its services hereunder. The Trustee's compensation
shall not be limited by any law on compensation of a trustee of an express
trust. The Company shall reimburse the Trustee upon request for all reasonable
disbursements, expenses and advances (including reasonable fees and expenses of
counsel) incurred or made by it in addition to the compensation for its
services, except any such disbursements, expenses and advances as may be
attributable to the Trustee's negligence or bad faith. Such expenses shall
include the reasonable compensation, legal fees, disbursements and expenses of
the Trustee's agents, accountants, experts, nominees, custodians and counsel and
any taxes or other expenses incurred by a trust created pursuant to Section 8.01
hereof.
The Company shall indemnify the Trustee, its directors,
officers and employees and each predecessor trustee for, and hold it harmless
against, any loss, liability or expense incurred by the Trustee without
negligence or bad faith on its part arising out of or in connection with the
administration of this trust and its duties under this
<PAGE> 99
Indenture, including the reasonable expenses and attorneys' fees of defending
itself against any claim of liability arising hereunder. The Trustee shall
notify the Company promptly of any claim asserted against the Trustee for which
it may seek indemnity. However, the failure by the Trustee to so notify the
Company shall not relieve the Company of its obligations hereunder. The Company
shall defend the claim and the Trustee shall cooperate in the defense (and may
employ its own counsel) at the Company's expense. The Company need not pay for
any settlement made without its written consent, which consent shall not be
unreasonably withheld or delayed. The Company need not reimburse any expense or
indemnify against any loss or liability incurred by the Trustee as a result of
the violation of this Indenture by the Trustee if such violation arose from the
Trustee's negligence or bad faith.
To secure the Company's payment obligations in this Section
7.07, the Trustee shall have a senior claim and lien prior to the Securities
against all money or property held or collected by the Trustee, in its capacity
as Trustee.
When the Trustee incurs expenses or renders services after an
Event of Default specified in clause (5) or (6) of Section 6.01 occurs, the
expenses (including the reasonable fees and expenses of its agents and counsel)
and the compensation for the services shall be preferred over the status of the
Holders in a proceeding under any Bankruptcy Law and are intended to constitute
expenses of administration under any Bankruptcy Law. The Company's obligations
under this Section 7.07 and any claim arising hereunder shall survive the
resignation or removal of any Trustee, the discharge of the Company's
obligations pursuant to Article Eight and any rejection or termination under any
Bankruptcy Law.
SECTION 7.08. REPLACEMENT OF TRUSTEE.
The Trustee may resign at any time by so notifying the Company
in writing. The Holders of a majority in principal amount of the outstanding
Securities may remove the Trustee by so notifying the Company and the Trustee in
writing and may
<PAGE> 100
appoint a successor trustee with the Company's consent. The Company may
remove the Trustee if:
(1) the Trustee fails to comply with Section 7.10;
(2) the Trustee is adjudged a bankrupt or an insolvent;
(3) a receiver or other public officer takes charge of
the Trustee or its property; or
(4) the Trustee becomes legally incapable of acting with
respect to its duties hereunder.
If the Trustee resigns or is removed or if a vacancy exists in
the office of Trustee for any reason, the Company shall notify each Holder of
such event and shall promptly appoint a successor Trustee. Within one year after
the successor Trustee takes office, the Holders of a majority in principal
amount of the Securities may appoint a successor Trustee to replace the
successor Trustee appointed by the Company.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Company. Immediately after that,
the retiring Trustee shall transfer, after payment of all sums then owing to the
Trustee pursuant to Section 7.07, all property held by it as Trustee to the
successor Trustee, subject to the lien provided in Section 7.07, the resignation
or removal of the retiring Trustee shall become effective, and the successor
Trustee shall have all the rights, powers and duties of the Trustee under this
Indenture; PROVIDED, HOWEVER, that no Trustee under this Indenture shall be
liable for any act or omission of any successor Trustee. A successor Trustee
shall mail notice of its succession to each Securityholder.
If a successor Trustee does not take office within 30 days
after the retiring Trustee resigns or is removed, the retiring Trustee, the
Company or the Holders of at least 10% in principal amount of the outstanding
Securities may petition any
<PAGE> 101
court of competent jurisdiction for the appointment of a successor Trustee.
If the Trustee fails to comply with Section 7.10, any
Securityholder may petition any court of competent jurisdiction for the removal
of the Trustee and the appointment of a successor Trustee.
Notwithstanding replacement of the Trustee pursuant to this
Section 7.08, the Company's obligations under Section 7.07 shall continue for
the benefit of the retiring Trustee and the Company shall pay to any such
replaced or removed Trustee all amounts owed under Section 7.07 upon such
replacement or removal.
SECTION 7.09. SUCCESSOR TRUSTEE BY MERGER, ETC.
If the Trustee consolidates with, merges or converts into, or
transfers all or substantially all of its corporate trust business to, another
corporation, the resulting, surviving or transferee corporation without any
further act shall, if such resulting, surviving or transferee corporation is
otherwise eligible hereunder, be the successor Trustee. In case any Securities
shall have been authenticated, but not delivered, by the Trustee then in office,
any successor by merger, conversion or consolidation to such authenticating
Trustee may adopt such authentication and deliver the Securities so
authenticated with the same effect as if such successor Trustee had itself
authenticated such Securities.
SECTION 7.10. ELIGIBILITY; DISQUALIFICATION.
This Indenture shall always have a Trustee who satisfies the
requirement of TIA ss.ss. 310(a)(1) and 310(a)(5). The Trustee shall have a
combined capital and surplus of at least $50,000,000 as set forth in its most
recent published annual report of condition. The Trustee shall comply with TIA
ss. 310(b); PROVIDED, HOWEVER, that there shall be excluded from the operation
of TIA ss. 310(b)(1) any indenture or indentures under which other securities,
or certificates of interest or participation in other securities, of the Company
<PAGE> 102
are outstanding, if the requirements for such exclusion set forth in TIA ss.
310(b)(1) are met.
SECTION 7.11. PREFERENTIAL COLLECTION OF CLAIMS AGAINST COMPANY.
The Trustee, in its capacity as Trustee hereunder, shall
comply with TIA ss. 311(a), excluding any creditor relationship listed in TIA
ss. 311(b). A Trustee who has resigned or been removed shall be subject to TIA
ss. 311(a) to the extent indicated.
ARTICLE EIGHT
SATISFACTION AND DISCHARGE OF INDENTURE
SECTION 8.01. LEGAL DEFEASANCE AND COVENANT DEFEASANCE.
(a) The Company may, at its option by Board Resolution,
at any time, with respect to the Securities, elect to have either paragraph (b)
or paragraph (c) below be applied to the outstanding Securities upon compliance
with the conditions set forth in paragraph (d).
(b) Upon the Company's exercise under paragraph (a) of
the option applicable to this paragraph (b), the Company shall be deemed to have
been released and discharged from its obligations with respect to the
outstanding Securities on the date the conditions set forth below are satisfied
(hereinafter, "Legal Defeasance"). For this purpose, such Legal Defeasance means
that the Company shall be deemed to have paid and discharged the entire
indebtedness represented by the outstanding Securities, which shall thereafter
be deemed to be "outstanding" only for the purposes of the Sections and matters
under this Indenture referred to in (i) and (ii) below, and to have satisfied
all its other obligations under such Securities and this Indenture insofar as
such Securities are concerned, except for the following, which shall survive
until otherwise terminated or discharged hereunder: (i) the rights of the
Holders of outstanding Securities to receive payment in respect
<PAGE> 103
of the principal of, premium, if any, and interest on such Securities when such
payments are due, (ii) the Company's obligations to issue temporary Securities,
register the transfer or exchange of any Securities, replace mutilated,
destroyed, lost or stolen Securities and maintain an office or agency for
payments in respect of the Securities, (iii) the rights, powers, trusts, duties
and immunities of the Trustee, and (iv) the Legal Defeasance provisions of this
Indenture. The Company may exercise its option under this paragraph (b)
notwithstanding the prior exercise of its option under paragraph (c) below with
respect to the Securities.
(c) Upon the Company's exercise under paragraph (a) of
the option applicable to this paragraph (c), the Company shall be released and
discharged from its obligations under any covenant contained in Article Five and
in Sections 4.03 through 4.24 with respect to the outstanding Securities on and
after the date the conditions set forth below are satisfied (hereinafter,
"Covenant Defeasance"), and the Securities shall thereafter be deemed to be not
"outstanding" for the purpose of any direction, waiver, consent or declaration
or act of Holders (and the consequences of any thereof) in connection with such
covenants, but shall continue to be deemed "outstanding" for all other purposes
hereunder. For this purpose, such Covenant Defeasance means that, with respect
to the outstanding Securities, the Company and any Guarantor may omit to comply
with and shall have no liability in respect of any term, condition or limitation
set forth in any such covenant, whether directly or indirectly, by reason of any
reference elsewhere herein to any such covenant or by reason of any reference in
any such covenant to any other provision herein or in any other document and
such omission to comply shall not constitute a Default or an Event of Default
under Section 6.01(3), nor shall any event referred to in Section 6.01(4) or (7)
thereafter constitute a Default or an Event of Default thereunder but, except as
specified above, the remainder of this Indenture and such Securities shall be
unaffected thereby.
(d) The following shall be the conditions to application
of either paragraph (b) or paragraph (c) above to the outstanding Securities:
<PAGE> 104
(1) The Company shall have irrevocably deposited in trust
with the Trustee, pursuant to an irrevocable trust and security
agreement in form and substance reasonably satisfactory to the Trustee,
U.S. Legal Tender or direct non-callable obligations of, or
non-callable obligations guaranteed by, the United States of America
for the payment of which obligation or guarantee the full faith and
credit of the United States of America is pledged ("U.S. Government
Obligations") maturing as to principal and interest in such amounts and
at such times as are sufficient, without consideration of the
reinvestment of such interest and principal and after payment of all
Federal, state and local taxes or other charges or assessments in
respect thereof payable by the Trustee, in the opinion of a nationally
recognized firm of Independent public accountants expressed in a
written certification thereof (in form and substance reasonably
satisfactory to the Trustee) delivered to the Trustee, to pay the
principal of, premium, if any, and interest on all the outstanding
Securities on the dates on which any such payments are due and payable
in accordance with the terms of this Indenture and of the Securities;
(2) Such deposits shall not cause the Trustee to have a
conflicting interest as defined in and for purposes of the TIA;
(3) The Trustee shall have received Officers'
Certificates stating that no Default or Event of Default or event which
with notice or lapse of time or both would become a Default or an Event
of Default with respect to the Securities shall have occurred and be
continuing on the date of such deposit or, insofar as Section 6.01(5)
or (6) is concerned, at any time during the period ending on the 91st
day after the date of such deposit (it being understood that this
condition shall not be deemed satisfied until the expiration of such
period);
(4) The Trustee shall have received Officers'
Certificates stating that such deposit will not result in a Default
under this Indenture or a breach or violation
<PAGE> 105
of, or constitute a default under, any other material instrument or
agreement to which the Company or any of its Subsidiaries is a party or
by which it or its property is bound;
(5) (i) In the event the Company elects paragraph (b)
hereof, the Company shall deliver to the Trustee an Opinion of Counsel,
in form and substance reasonably satisfactory to the Trustee to the
effect that (A) the Company has received from, or there has been
published by, the Internal Revenue Service a ruling or (B) since the
Issue Date, there has been a change in the applicable federal income
tax law, in either case to the effect that, and based thereon such
Opinion of Counsel shall state that Holders of the Securities will not
recognize income gain or loss for Federal income tax purposes as a
result of such deposit and the defeasance contemplated hereby and will
be subject to Federal income taxes in the same manner and at the same
times as would have been the case of such deposit and defeasance had
not occurred, or (ii) in the event the Company elects paragraph (c)
hereof, the Company shall deliver to the Trustee an Opinion of Counsel,
in form and substance reasonably satisfactory to the Trustee, to the
effect that, Holders of the Securities will not recognize income, gain
or loss for Federal income tax purposes as a result of such deposit and
the defeasance contemplated hereby and will be subject to Federal
income tax in the same amounts and in the same manner and at the same
times as would have been the case if such deposit and defeasance had
not occurred;
(6) The Company shall have delivered to the Trustee an
Opinion of Counsel stating that as a result of the Legal Defeasance or
Covenant Defeasance, neither the Trustee nor the trust have become or
are deemed to have become an "investment company" under the Investment
Company Act of 1940, as amended;
(7) The Company shall have delivered to the Trustee an
Officers' Certificate, in form and substance reasonably satisfactory to
the Trustee, stating that the deposit
<PAGE> 106
under clause (1) was not made by the Company, a Guarantor or any
Subsidiary of the Company with the intent of defeating, hindering,
delaying or defrauding any other creditors of the Company, a Guarantor,
or any Subsidiary of the Company or others;
(8) The Company shall have delivered to the Trustee an
Opinion of Counsel, in form and substance reasonably satisfactory to
the Trustee, to the effect that, (A) the trust funds will not be
subject to the rights of holders of Indebtedness of the Company or any
Guarantor other than the Securities and (B) assuming no intervening
bankruptcy of the Company between the date of deposit and the 91st day
following the deposit and that no Holder of Securities is an insider of
the Company, after the passage of 90 days following the deposit, the
trust funds will not be subject to any applicable bankruptcy,
insolvency, reorganization or similar law affecting creditors' rights
generally;
(9) The Company has delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all conditions
precedent specified herein relating to the defeasance contemplated by
this Section 8.01 have been complied with; PROVIDED, HOWEVER, that no
deposit under clause (1) above shall be effective to terminate the
obligations of the Company under the Securities or this Indenture prior
to 90 days following any such deposit; and
(10) The Company shall have paid all amounts owing to the
Trustee pursuant to Section 7.07.
Notwithstanding the foregoing, the Opinion of Counsel required
by paragraph (5) above need not be delivered if all Securities not theretofore
delivered to the Trustee for cancellation (i) have become due and payable, (ii)
will become due and payable on the maturity date for the securities within one
year, or (iii) are to be called for redemption within one year under
arrangements satisfactory to the Trustee for the giving of notice of redemption
by the Trustee in the name, and at the expense, of the Company.
<PAGE> 107
In the event all or any portion of the Securities are to be
redeemed through such irrevocable trust, the Company must make arrangements
satisfactory to the Trustee, at the time of such deposit, for the giving of the
notice of such redemption or redemptions by the Trustee in the name and at the
expense of the Company.
SECTION 8.02. SATISFACTION AND DISCHARGE.
In addition to the Company's rights under Section 8.01, the
Company may terminate all of its obligations under this Indenture (subject to
Section 8.03) when:
(1) all Securities theretofore authenticated and
delivered (other than Securities which have been destroyed, lost or
stolen and which have been replaced or paid as provided in Section
2.07) have been delivered to the Trustee for cancellation; or
(2) all Securities not theretofore delivered to the
Trustee for cancellation (except lost, stolen or destroyed Securities
which have been replaced or paid) have been called for redemption
pursuant to the terms of the Securities or have otherwise become due
and payable and the Company has irrevocably deposited or caused to be
deposited with the Trustee funds in an amount sufficient to pay and
discharge the entire Indebtedness on the Securities not theretofore
delivered to the Trustee for cancellation, for principal of, premium,
if any, and interest on the Securities to the date of deposit together
with irrevocable instructions from the Company directing the Trustee to
apply such funds to the payment thereof at maturity or redemption, as
the case may be; and
(3) the Company has paid or caused to be paid all other
sums payable hereunder and under the Securities by the Company; and
(4) there exists no Default or Event of Default under
this Indenture; and
<PAGE> 108
(5) the Company has delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all conditions
precedent specified herein relating to the satisfaction and discharge
of this Indenture have been complied with; and
(6) the Company shall have paid all amounts owing to the
Trustee pursuant to Section 7.07.
SECTION 8.03. SURVIVAL OF CERTAIN OBLIGATIONS.
Notwithstanding the satisfaction and discharge of this
Indenture and of the Securities referred to in Section 8.01 or 8.02, the
respective obligations of the Company and the Trustee under Sections 2.02, 2.03,
2.04, 2.05, 2.06, 2.07, 2.10, 2.12, 2.13, 4.01, 4.02 and 6.07, Article Seven and
Sections 8.05, 8.06 and 8.07 shall survive until the Securities are no longer
outstanding, and thereafter the obligations of the Company and the Trustee under
Sections 7.07, 8.05, 8.06 and 8.07 shall survive. Nothing contained in this
Article Eight shall abrogate any of the rights, obligations or duties of the
Trustee under this Indenture.
SECTION 8.04. ACKNOWLEDGMENT OF DISCHARGE BY TRUSTEE.
Subject to Section 8.07, after (i) the conditions of Section
8.01 or 8.02 have been satisfied, (ii) the Company has paid or caused to be paid
all other sums payable hereunder by the Company, and (iii) the Company has
delivered to the Trustee an Officers' Certificate and an Opinion of Counsel,
each stating that all conditions precedent referred to in clause (i) above
relating to the satisfaction and discharge of this Indenture have been complied
with, the Trustee upon written request shall acknowledge in writing the
discharge of the Company's obligations under this Indenture except for those
surviving obligations specified in Section 8.03.
SECTION 8.05. APPLICATION OF TRUST ASSETS.
The Trustee shall hold any U.S. Legal Tender or U.S.
Government Obligations deposited with it in the irrevocable
<PAGE> 109
trust established pursuant to Section 8.01. The Trustee shall apply the
deposited U.S. Legal Tender or the U.S. Government Obligations, together with
earnings thereon, through the Paying Agent, in accordance with this Indenture
and the terms of the irrevocable trust agreement established pursuant to Section
8.01, to the payment of principal of and interest on the Securities. The U.S.
Legal Tender or U.S. Government Obligations so held in trust and deposited with
the Trustee in compliance with Section 8.01 shall not be part of the trust
estate under this Indenture, but shall constitute a separate trust fund for the
benefit of all Holders entitled thereto.
SECTION 8.06. REPAYMENT TO THE COMPANY OR GUARANTORS; UNCLAIMED MONEY.
Subject to Sections 7.07 and 8.01, the Trustee shall promptly
pay to the Company, or if deposited with the Trustee by any Guarantor, to such
Guarantor, upon receipt by the Trustee of an Officers' Certificate, any excess
money, determined in accordance with Section 8.01, held by it at any time. The
Trustee and the Paying Agent shall pay to the Company or any Guarantor, as the
case may be, upon receipt by the Trustee or the Paying Agent, as the case may
be, of an Officers' Certificate, any money held by it for the payment of
principal, premium, if any, or interest that remains unclaimed for two years
after payment to the Holders is required; PROVIDED, HOWEVER, that the Trustee
and the Paying Agent before being required to make any payment may, but need
not, at the expense of the Company cause to be published once in a newspaper of
general circulation in The City of New York or mail to each Holder entitled to
such money notice that such money remains unclaimed and that after a date
specified therein (which shall not be less than 30 days from the date of such
mailing or publication and shall be at least two years after the date such money
held by the Trustee for the payment of principal, premium, if any, or interest
remains unclaimed), any unclaimed balance of such money then remaining will be
repaid to the Company. After payment to the Company or any Guarantor, as the
case may be, Securityholders entitled to such money must look solely to the
Company for payment as general creditors unless an applicable abandoned property
law designates another
<PAGE> 110
Person, and all liability of the Trustee or Paying Agent with respect to such
money shall thereupon cease.
SECTION 8.07. REINSTATEMENT.
If the Trustee or Paying Agent is unable to apply any money or
U.S. Government Obligations in accordance with this Indenture by reason of any
legal proceeding or by reason of any order or judgment of any court or
governmental authority enjoining, restraining or otherwise prohibiting such
application, then and only then the Company's and each Guarantor's, if any,
obligations under this Indenture and the Securities shall be revived and
reinstated as though no deposit had been made pursuant to this Indenture until
such time as the Trustee is permitted to apply all such money or U.S. Government
Obligations in accordance with this Indenture; PROVIDED, HOWEVER, that if the
Company or the Guarantors, as the case may be, have made any payment of
principal of, premium, if any, or interest on any Securities because of the
reinstatement of their obligations, the Company or the Guarantors, as the case
may be, shall be subrogated to the rights of the holders of such Securities to
receive such payment from the money or U.S. Government Obligations held by the
Trustee or Paying Agent.
ARTICLE NINE
AMENDMENTS, SUPPLEMENTS AND WAIVERS
SECTION 9.01. WITHOUT CONSENT OF HOLDERS.
The Company and any Guarantors (when authorized by Board
Resolutions), and the Trustee, together, may amend or supplement this Indenture
or the Securities without notice to or consent of any Securityholder:
(1) to cure any ambiguity, defect or inconsistency;
(2) to evidence the succession in accordance with Article
Five hereof of another Person to the Company or a Guarantor and the
assumption by any such successor of the
<PAGE> 111
covenants of the Company or a Guarantor herein and in the Securities or
a Guarantee, as the case may be;
(3) to provide for uncertificated Securities in addition
to or in place of certificated Securities;
(4) to make any other change that does not materially
adversely affect the rights of any Securityholders hereunder;
(5) to comply with any requirements of the SEC in
connection with the qualification of this Indenture under the TIA; or
(6) to add or release any Guarantor pursuant to the terms
of this Indenture;
PROVIDED that each of the Company and any Guarantors has delivered to the
Trustee an Opinion of Counsel and an Officers' Certificate, each stating that
such amendment or supplement complies with the provisions of this Section 9.01.
SECTION 9.02. WITH CONSENT OF HOLDERS.
Subject to Section 6.07, the Company and any Guarantors (when
authorized by Board Resolutions) and the Trustee, together, with the written
consent of the Holder or Holders of at least a majority in aggregate principal
amount of the then outstanding Securities, may amend or supplement this
Indenture, the Securities and any Guarantees without notice to any other
Securityholders. Subject to Section 6.07, the Holder or Holders of a majority in
aggregate principal amount of the then outstanding Securities may waive
compliance by the Company with any provision of this Indenture or the Securities
without notice to any other Securityholder. Without the consent of each
Securityholder affected, however, no amendment, supplement or waiver, including
a waiver pursuant to Section 6.04, may:
(1) reduce the principal amount of Securities whose
Holders must consent to an amendment, supplement or waiver of any
provision of this Indenture, the Securities or any Guarantees;
<PAGE> 112
(2) reduce the rate or change or have the effect of
changing the time for payment of interest, including default interest,
on any Security;
(3) reduce the principal amount of any Security;
(4) change or have the effect of changing the Final
Maturity Date of any Security, or alter the redemption or repurchase
provisions contained in this Indenture or the Securities in a manner
adverse to any Holder;
(5) make any change in provisions of this Indenture
protecting the right of each Holder to receive payment of principal of
and interest on such Security on or after the due date thereof or to
bring suit to enforce such payment, or permitting Holders of a majority
in principal amount of the then outstanding Securities to waive
Defaults or Events of Default;
(6) make any changes in Section 6.04, 6.07 or this
Section 9.02;
(7) make the principal of, premium or the interest on any
Security payable in money other than as provided for in this Indenture
as in effect on the date hereof;
(8) affect the ranking of the Securities or any
Guarantee, in each case in a manner adverse to the Holders;
(9) amend, modify or change the obligation of the Company
to make or consummate a Change of Control Offer after the occurrence of
a Change of Control or make or consummate a Net Proceeds Offer with
respect to any Asset Sale that has been consummated or waive any
default in the performance thereof or modify any of the provisions or
definitions with respect to any such offers;
(10) release any Guarantor from any of its obligations
under its Guarantee or this Indenture otherwise than in accordance with
the terms of this Indenture; or
<PAGE> 113
(11) modify the provisions of Section 4.22 in any manner
adverse to a Holder of Notes.
It shall not be necessary for the consent of the Holders under
this Section 9.02 to approve the particular form of any proposed amendment,
supplement or waiver, but it shall be sufficient if such consent approves the
substance thereof.
After an amendment, supplement or waiver under this Section
9.02 becomes effective, the Company shall mail to the Holders affected thereby a
notice briefly describing the amendment, supplement or waiver. Any failure of
the Company to mail such notice, or any defect therein, shall not, however, in
any way impair or affect the validity of any such supplemental indenture.
SECTION 9.03. COMPLIANCE WITH TIA.
From the date on which this Indenture is qualified under the
TIA, every amendment, waiver or supplement of this Indenture or the Securities
shall comply with the TIA as then in effect.
SECTION 9.04. REVOCATION AND EFFECT OF CONSENTS.
Until an amendment, waiver or supplement becomes effective, a
consent to it by a Holder is a continuing consent by the Holder and every
subsequent Holder of a Security or portion of a Security that evidences the same
debt as the consenting Holder's Security, even if notation of the consent is not
made on any Security. However, any such Holder or subsequent Holder may revoke
the consent as to his Security or portion of his Security by notice to the
Trustee or the Company received before the date on which the Trustee receives an
Officers' Certificate certifying that the Holders of the requisite principal
amount of Securities have consented (and not theretofore revoked such consent)
to the amendment, supplement or waiver.
The Company may, but shall not be obligated to, fix a record
date for the purpose of determining the Holders entitled
<PAGE> 114
to consent to any amendment, supplement or waiver. If a record date is fixed,
then notwithstanding the last sentence of the immediately preceding paragraph,
those Persons who were Holders at such record date (or their duly designated
proxies), and only those Persons, shall be entitled to revoke any consent
previously given, whether or not such Persons continue to be Holders after such
record date. No such consent shall be valid or effective for more than 90 days
after such record date.
After an amendment, supplement or waiver becomes effective, it
shall bind every Securityholder, unless it makes a change described in any of
clauses (1) through (10) of Section 9.02, in which case, the amendment,
supplement or waiver shall bind only each Holder of a Security who has consented
to it and every subsequent Holder of a Security or portion of a Security that
evidences the same debt as the consenting Holder's Security; PROVIDED that any
such waiver shall not impair or affect the right of any Holder to receive
payment of principal of and interest on a Security, on or after the respective
due dates expressed in such Security, or to bring suit for the enforcement of
any such payment on or after such respective dates without the consent of such
Holder.
SECTION 9.05. NOTATION ON OR EXCHANGE OF SECURITIES.
If an amendment, supplement or waiver changes the terms of a
Security, the Trustee may require the Holder of the Security to deliver it to
the Trustee. The Trustee may place an appropriate notation on the Security about
the changed terms and return it to the Holder. Alternatively, if the Company or
the Trustee so determines, the Company in exchange for the Security shall issue
and the Trustee shall authenticate a new Security that reflects the changed
terms. Failure to make the appropriate notation or to issue a new Security shall
not affect the validity and effect of such amendment, supplement or waiver.
SECTION 9.06. TRUSTEE TO SIGN AMENDMENTS, ETC.
The Trustee shall execute any amendment, supplement or waiver
authorized pursuant to this Article Nine; PROVIDED
<PAGE> 115
that the Trustee may, but shall not be obligated to, execute any such amendment,
supplement or waiver which affects the Trustee's own rights, duties or
immunities under this Indenture. The Trustee shall be entitled to receive, and
shall be fully protected in relying upon, an Opinion of Counsel and an Officers'
Certificate each stating that the execution of any amendment, supplement or
waiver authorized pursuant to this Article Nine is authorized or permitted by
this Indenture and constituted the legal, valid and binding obligations of the
Company enforceable in accordance with its terms. Such Opinion of Counsel shall
be at the expense of the Company, and the Trustee shall have a lien under
Section 7.07 for any such expense.
ARTICLE TEN
GUARANTEE
SECTION 10.01. UNCONDITIONAL GUARANTEE.
Each Guarantor agrees to unconditionally, jointly and
severally, guarantee to each Holder of a Security authenticated and delivered by
the Trustee, and to the Trustee and its successors and assigns, that: (i) the
principal of, premium and interest on the Securities will be promptly paid in
full when due, subject to any applicable grace period, whether at maturity, by
acceleration or otherwise and interest on the overdue principal, if any, and
interest on any interest, to the extent lawful, of the Securities and all other
Obligations of the Company to the Holders or the Trustee hereunder or thereunder
will be promptly paid in full or performed, all in accordance with the terms
hereof and thereof; and (ii) in case of any extension of time of payment or
renewal of any Securities or of any such other Obligations, the same will be
promptly paid in full when due or performed in accordance with the terms of the
extension or renewal, subject to any applicable grace period, whether at stated
maturity, by acceleration or otherwise, subject, however, in the case of clauses
(i) and (ii) above, to the limitations set forth in
<PAGE> 116
Section 10.03. Each Guarantor agrees that its obligations hereunder shall be
unconditional, irrespective of the validity, regularity or enforceability of the
Securities or this Indenture, the absence of any action to enforce the same, any
waiver or consent by any Holder of the Securities with respect to any provisions
hereof or thereof, the recovery of any judgment against the Company, any action
to enforce the same or any other circumstance which might otherwise constitute a
legal or equitable discharge or defense of a Guarantor. Each Guarantor waives
diligence, presentment, demand of payment, filing of claims with a court in the
event of insolvency or bankruptcy of the Company, any right to require a
proceeding first against the Company, protest, notice and all demands whatsoever
and covenants that its Guarantee will not be discharged except by complete
performance of the obligations contained in the Securities, this Indenture and
each Guarantee. If any Securityholder or the Trustee is required by any court or
otherwise to return to the Company, any Guarantor or any custodian, trustee,
liquidator or other similar official acting in relation to the Company or any
Guarantor, any amount paid by the Company or any Guarantor to the Trustee or
such Securityholder, each Guarantee to the extent theretofore discharged, shall
be reinstated in full force and effect. Each Guarantor further agrees that, as
between each Guarantor, on the one hand, and the Holders and the Trustee, on the
other hand, (x) the maturity of the obligations guaranteed hereby may be
accelerated as provided in Article Six for the purposes of each Guarantee
notwithstanding any stay, injunction or other prohibition preventing such
acceleration in respect of the obligations guaranteed hereby, and (y) in the
event of any acceleration of such obligations as provided in Article Six, such
obligations (whether or not due and payable) shall forthwith become due and
payable by each Guarantor for the purpose of its Guarantee.
SECTION 10.02. SEVERABILITY.
In case any provision of a Guarantee shall be invalid, illegal
or unenforceable, the validity, legality, and enforceability of the remaining
provisions shall not in any way be affected or impaired thereby.
<PAGE> 117
SECTION 10.03. RELEASE OF A GUARANTOR.
If all or substantially all of the assets of any Guarantor or
all of the Capital Stock of any Guarantor owned by the Company and/or any of the
Restricted Subsidiaries is sold (including by issuance, merger, consolidation or
otherwise) by the Company and/or any of the Restricted Subsidiaries in a
transaction constituting an Asset Sale, and if the Net Cash Proceeds from such
Asset Sale are to be used in accordance with Section 4.12, then such Guarantor
(in the event of a sale or other disposition of all of the Capital Stock of such
Guarantor) or the corporation or other entity acquiring such assets (in the
event of a sale or other disposition of all or substantially all of the assets
of such Guarantor) shall be released and discharged of its Obligations under its
Guarantee.
The Trustee shall deliver an appropriate instrument evidencing
such release upon receipt of a request by the Company accompanied by an
Officers' Certificate and Opinion of Counsel certifying as to the compliance
with this Section 10.03. Any Guarantor not so released remains liable for the
full amount of principal of and interest on the Securities as provided in this
Article Ten.
SECTION 10.04. LIMITATION OF A GUARANTOR'S LIABILITY.
Each Guarantor and, by its acceptance hereof, each Holder
hereby confirms that it is the intention of all such parties that the guarantee
by such Guarantor pursuant to its Guarantee not constitute a fraudulent transfer
or conveyance for purposes of any Bankruptcy Law, the Uniform Fraudulent
Conveyance Act, the Uniform Fraudulent Transfer Act or any similar Federal or
state law. To effectuate the foregoing intention, the Holders and each Guarantor
irrevocably agree that the obligations of each Guarantor under its Guarantee
shall be limited to the maximum amount as will, after giving effect to all other
contingent and fixed liabilities of such Guarantor, and after giving effect to
any collections from or payments made by or on behalf of any other Guarantor in
respect of the obligations of such other Guarantor under its Guarantee, or
pursuant to Section 10.05, result in the obligations of such
<PAGE> 118
Guarantor under its Guarantee not constituting such fraudulent transfer or
conveyance.
SECTION 10.05. CONTRIBUTION.
In order to provide for just and equitable contribution among
the Guarantors, the Guarantors agree, INTER SE, that in the event any payment or
distribution is made by any Guarantor (a "Funding Guarantor") under its
Guarantee, such Funding Guarantor shall be entitled to a contribution from all
other Guarantors in a PRO RATA amount based on the Adjusted Net Assets of each
Guarantor (including the Funding Guarantor) for all payments, damages and
expenses incurred by that Funding Guarantor in discharging the Company's
obligations with respect to the Securities or any other Guarantor's obligations
with respect to its Guarantee. "Adjusted Net Assets" of a Guarantor at any date
shall mean the lesser of the amount by which (x) the fair value of the property
of such Guarantor exceeds the total amount of liabilities, including, without
limitation, contingent liabilities (after giving effect to all other fixed and
contingent liabilities incurred or assumed on such date), but excluding
liabilities under the Guarantee of such Guarantor at such date and (y) the
present fair salable value of the assets of such Guarantor at such date exceeds
the amount that will be required to pay the probable liability of such Guarantor
on its debts (after giving effect to all other fixed and contingent liabilities
incurred or assumed on such date), excluding debt in respect of the Guarantee of
such Guarantor, as they become absolute and matured.
SECTION 10.06. WAIVER OF SUBROGATION.
Until all Guarantee Obligations are paid in full, each
Guarantor hereby irrevocably waives any claims or other rights which it may now
or hereafter acquire against the Company that arise from the existence, payment,
performance or enforcement of such Guarantor's obligations under its Guarantee
and this Indenture, including, without limitation, any right of subrogation,
reimbursement, exoneration, indemnification, and any right to participate in any
claim or remedy of any Holder of Securities against the Company, whether or not
such claim,
<PAGE> 119
remedy or right arises in equity, or under contract, statute or common law,
including, without limitation, the right to take or receive from the Company,
directly or indirectly, in cash or other property or by set-off or in any other
manner, payment or security on account of such claim or other rights. If any
amount shall be paid to any Guarantor in violation of the preceding sentence and
the Securities shall not have been paid in full, such amount shall have been
deemed to have been paid to such Guarantor for the benefit of, and held in trust
for the benefit of, the Holders of the Securities, and shall forthwith be paid
to the Trustee for the benefit of such Holders to be credited and applied upon
the Securities, in accordance with the terms of this Indenture. Each Guarantor
acknowledges that it will receive direct and indirect benefits from the
financing arrangements contemplated by this Indenture and that the waiver set
forth in this Section 10.06 is knowingly made in contemplation of such benefits.
SECTION 10.07. EXECUTION OF GUARANTEES.
To evidence its guarantee to the Securityholders set forth in
this Article Ten, each Guarantor shall execute a Guarantee in substantially the
form of EXHIBIT G attached hereto, which shall be endorsed on each Security
ordered to be authenticated and delivered by the Trustee. Each Guarantor agrees
that its Guarantee set forth in this Article Ten shall remain in full force and
effect notwithstanding any failure to endorse on each Security a notation of
such Guarantee. Each such Guarantee shall be signed on behalf of each Guarantor
by two Officers, or an Officer and an Assistant Secretary or one Officer shall
sign and one Officer or an Assistant Secretary (each of whom shall, in each
case, have been duly authorized by all requisite corporate actions) shall attest
to such Guarantee prior to the authentication of the Security on which it is
endorsed, and the delivery of such Security by the Trustee, after the
authentication thereof hereunder, shall constitute due delivery of such
Guarantee on behalf of such Guarantor. Such signatures upon the Guarantee may be
by manual or facsimile signature of such officers and may be imprinted or
otherwise reproduced on the Guarantee, and in case any such officer who shall
have signed the Guarantee shall cease to be
<PAGE> 120
such officer before the Security on which such Guarantee is endorsed shall have
been authenticated and delivered by the Trustee or disposed of by the Company,
such Security nevertheless may be authenticated and delivered or disposed of as
though the person who signed the Guarantee had not ceased to be such officer of
the Guarantor.
SECTION 10.08. WAIVER OF STAY, EXTENSION OR USURY LAWS.
Each Guarantor covenants (to the extent that it may lawfully
do so) that it will not at any time insist upon, plead, or in any manner
whatsoever claim or take the benefit or advantage of, any stay or extension law
or any usury law or other law that would prohibit or forgive each such Guarantor
from performing its Guarantee as contemplated herein, wherever enacted, now or
at any time hereafter in force, or which may affect the covenants or the
performance of this Indenture; and (to the extent that it may lawfully do so)
each such Guarantor hereby expressly waives all benefit or advantage of any such
law, and covenants that it will not hinder, delay or impede the execution of any
power herein granted to the Trustee, but will suffer and permit the execution of
every such power as though no such law had been enacted.
ARTICLE ELEVEN
MISCELLANEOUS
SECTION 11.01. TIA CONTROLS.
If any provision of this Indenture limits, qualifies, or
conflicts with the duties imposed by operation of Section 318(c) of the TIA, the
imposed duties shall control.
SECTION 11.02. NOTICES.
Any notices or other communications required or permitted
hereunder shall be in writing, and shall be sufficiently given if made by hand
delivery, by telex, by
<PAGE> 121
telecopier or registered or certified mail, postage prepaid, return receipt
requested, addressed as follows:
if to the Company or a Guarantor:
Simonds Industries Inc.
135 Intervale Road
Fitchburg, Massachusetts 01420
Attention: Chief Financial Officer
Facsimile: (978) 343-3489
if to the Trustee:
State Street Bank and Trust Company
Two International Place
Fourth Floor
Boston, Massachusetts 02110
Attention: Corporate Trust Department
Facsimile: (617) 664-5151
Each of the Company and the Trustee by written notice to each
other such person may designate additional or different addresses for notices to
such person. Any notice or communication to the Company or a Guarantor or the
Trustee shall be deemed to have been given or made as of the date so delivered
if personally delivered; when answered back, if telexed; when receipt is
acknowledged, if telecopied; and five (5) calendar days after mailing if sent by
registered or certified mail, postage prepaid (except that a notice of change of
address shall not be deemed to have been given until actually received by the
addressee).
Any notice or communication mailed to a Securityholder shall
be mailed to him by first class mail or other equivalent means at his address as
it appears on the registration books of the Registrar and shall be sufficiently
given to him if so mailed within the time prescribed.
<PAGE> 122
Failure to mail a notice or communication to a Securityholder
or any defect in it shall not affect its sufficiency with respect to other
Securityholders. If a notice or communication is mailed in the manner provided
above, it is duly given, whether or not the addressee receives it.
SECTION 11.03. COMMUNICATIONS BY HOLDERS WITH OTHER HOLDERS.
Securityholders may communicate pursuant to TIA ss. 312(b)
with other Securityholders with respect to their rights under this Indenture,
the Securities or any Guarantees. The Company, the Trustee, the Registrar and
any other Person shall have the protection of TIA ss. 312(c).
SECTION 11.04. CERTIFICATE AND OPINION AS TO CONDITIONS PRECEDENT.
Upon any request or application by the Company to the Trustee
to take any action under this Indenture, the Company shall furnish to the
Trustee at the request of the Trustee:
(1) an Officers' Certificate, in form and substance
satisfactory to the Trustee, stating that, in the opinion of the
signers, all conditions precedent, if any, provided for in this
Indenture relating to the proposed action have been complied with; and
(2) an Opinion of Counsel stating that, in the opinion of
such counsel, all such conditions precedent have been complied with.
SECTION 11.05. STATEMENTS REQUIRED IN CERTIFICATE OR OPINION.
Each certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture, other than the Officers'
Certificate required by Section 4.08, shall include:
<PAGE> 123
(1) a statement that the person making such certificate
or opinion has read such covenant or condition;
(2) a brief statement as to the nature and scope of the
examination or investigation upon which the statements or opinions
contained in such certificate or opinion are based;
(3) a statement that, in the opinion of such person, he
has made such examination or investigation as is necessary to enable
him to express an informed opinion as to whether or not such covenant
or condition has been complied with; and
(4) a statement as to whether or not, in the opinion of
each such person, such condition or covenant has been complied with;
PROVIDED, HOWEVER, that with respect to matters of fact an Opinion of
Counsel may rely on an Officers' Certificate or certificates of public
officials.
SECTION 11.06. RULES BY TRUSTEE, PAYING AGENT, REGISTRAR.
The Trustee, Paying Agent or Registrar may make reasonable
rules for its functions.
SECTION 11.07. LEGAL HOLIDAYS.
If a payment date is not a Business Day, payment may be made
on the next succeeding day that is a Business Day with the same force and effect
as if made on such payment date.
SECTION 11.08. GOVERNING LAW.
THIS INDENTURE, THE SECURITIES AND ANY GUARANTEES SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK,
AS APPLIED TO CONTRACTS MADE AND PERFORMED WITHIN THE STATE OF NEW YORK, WITHOUT
REGARD TO PRINCIPLES OF CONFLICTS OF LAW. Each of the parties hereto agrees to
submit to the jurisdiction of the courts of the State of New York in any action
or proceeding arising out of or relating to this Indenture.
<PAGE> 124
SECTION 11.09. NO ADVERSE INTERPRETATION OF OTHER AGREEMENTS.
This Indenture may not be used to interpret another indenture,
loan or debt agreement of any of the Company or any of its Subsidiaries or any
Guarantor. Any such indenture, loan or debt agreement may not be used to
interpret this Indenture.
SECTION 11.10. NO RECOURSE AGAINST OTHERS.
A director, officer, employee, stockholder or incorporator, as
such, of the Company or any of its Subsidiaries or any Guarantor shall not have
any liability for any obligations of the Company or any Guarantor under the
Securities, this Indenture or any Guarantee or for any claim based on, in
respect of or by reason of such obligations or their creations. Each
Securityholder by accepting a Security waives and releases all such liability.
Such waiver and release are part of the consideration for the issuance of the
Securities.
SECTION 11.11. SUCCESSORS.
All agreements of the Company and any Guarantors in this
Indenture, the Securities and any Guarantees shall bind their respective
successors. All agreements of the Trustee in this Indenture shall bind its
successor.
SECTION 11.12. DUPLICATE ORIGINALS.
All parties may sign any number of copies of this Indenture.
Each signed copy or counterpart shall be an original, but all of them together
shall represent the same agreement.
SECTION 11.13. SEVERABILITY.
In case any one or more of the provisions in this Indenture,
in the Securities or in any Guarantee shall be held invalid, illegal or
unenforceable, in any respect for any reason, the validity, legality and
enforceability of any such provision in every other respect and of the remaining
<PAGE> 125
provisions shall not in any way be affected or impaired thereby, it being
intended that all of the provisions hereof shall be enforceable to the full
extent permitted by law.
SECTION 11.14. TABLE OF CONTENTS, HEADINGS, ETC.
The table of contents, cross-reference sheet and headings of
the Articles and Sections of this Indenture have been inserted for convenience
of reference only, and are not to be considered a part hereof, and shall in no
way modify or restrict any of the terms or provisions hereof.
ARTICLE TWELVE
SUBORDINATION
SECTION 12.01. SECURITIES SUBORDINATED TO SENIOR DEBT; GUARANTEES SUBORDINATED
TO GUARANTOR SENIOR DEBT.
The Company and each Guarantor covenants and agrees, and each
Holder of the Securities, by its acceptance thereof, likewise covenants and
agrees, that all Securities and Guarantees shall be issued subject to the
provisions of this Article Twelve; and each Person holding any Security, whether
upon original issue or upon transfer, assignment or exchange thereof, accepts
and agrees that the payment of all Obligations on the Securities and Guarantees
by the Company and any Guarantors shall, to the extent and in the manner herein
set forth, be subordinated and junior in right of payment to the prior payment
in full in cash or Cash Equivalents (or such payment shall be duly provided for
to the satisfaction of the holders of the Senior Debt and Guarantor Senior Debt,
as the case may be) of all Obligations on the Senior Debt and Guarantor Senior
Debt, as the case may be; that the subordination is for the benefit of, and
shall be enforceable directly by, the holders of Senior Debt and Guarantor
Senior Debt, as the case may be, and that each holder of Senior Debt and
Guarantor Senior Debt, as the case may be, whether now
<PAGE> 126
outstanding or hereafter created, incurred, assumed or guaranteed shall be
deemed to have acquired Senior Debt and Guarantor Senior Debt, as the case may
be, in reliance upon the covenants and provisions contained in this Indenture.
SECTION 12.02. NO PAYMENT ON SECURITIES IN CERTAIN CIRCUMSTANCES.
(a) If any default occurs and is continuing in the
payment when due, whether at maturity, upon any redemption, by declaration or
otherwise, of any principal of, interest on, unpaid drawings for letters of
credit issued in respect of, or regularly accruing fees with respect to, any
Senior Debt or Guarantor Senior Debt, no payment of any kind or character shall
be made by or on behalf of the Company or the applicable Guarantor or any other
Person on the Company's or such Guarantor's, as the case may be, behalf with
respect to any Obligations on the Securities or the Guarantee of such Guarantor,
as the case may be, or to acquire any of the Securities for cash or property or
otherwise. In addition, if any other event of default occurs and is continuing
with respect to any Designated Senior Debt, as such event of default is defined
in the instrument creating or evidencing such Designated Senior Debt, permitting
the holders of such Designated Senior Debt then outstanding to accelerate the
maturity thereof and if the Representative for the respective issue of
Designated Senior Debt gives written notice of the event of default to the
Trustee (a "Default Notice"), then neither the Company nor any other Person on
its behalf shall (x) make any payment of any kind or character with respect to
any Obligations on the Securities or (y) acquire any of the Securities for cash
or property or otherwise for a period of time (the "Blockage Period")
terminating on the earliest to occur of (1) the date all events of default on
the applicable issue of Designated Senior Debt have been cured or waived or
shall have ceased to exist and the Company and the Trustee receive written
notice thereof from the Representative for the applicable issue of Designated
Senior Debt, (2) the Trustee receives written notice from the Representative for
the applicable issue of Designated Senior Debt terminating the Blockage Period
or the benefits of this sentence are waived by
<PAGE> 127
the Representative for the applicable issue of Designated Senior Debt, (3) the
applicable issue of Designated Senior Debt is discharged or paid in full in cash
or Cash Equivalents or (4) the expiration of the 180-day consecutive period
commencing on the date of the giving of such Default Notice. Upon the
termination of such Blockage Period, the Company shall (to the extent not
otherwise prohibited by this Article Twelve) promptly resume making all payments
on the Securities, including all payments not made during such Blockage Period.
Notwithstanding anything herein to the contrary, in no event shall a Blockage
Period extend beyond 180 days from the date the payment on the Securities was
due and only one such Blockage Period may be commenced within any 360
consecutive days. No event of default which existed or was continuing on the
date of the commencement of any Blockage Period with respect to the Designated
Senior Debt shall be, or be made, the basis for commencement of a second
Blockage Period by the Representative of such Designated Senior Debt, whether or
not after a period of 360 consecutive days, unless such event of default shall
have been cured or waived or ceased to exit for a period of not less than 90
consecutive days (it being acknowledged that any subsequent action, or any
breach of any financial covenants for a period commencing after the date of
commencement of such Blockage Period that, in either case, would give rise to an
event of default pursuant to any provisions of the Designated Senior Debt under
which an event of default previously existed or was continuing shall constitute
a new event of default for this purpose).
(b) In the event that, notwithstanding the foregoing, any
payment shall be received by the Trustee or any Holder when such payment is
prohibited by Section 12.02(a), such payment shall be held in trust for the
benefit of, and shall be paid over or delivered to, the holders of Senior Debt
or Guarantor Senior Debt, as the case may be, (PRO RATA to such holders on the
basis of the respective amount of Senior Debt or Guarantor Senior Debt, as the
case may be, held by such holders) as their respective interests may appear. The
Trustee shall be entitled to conclusively rely on information regarding amounts
then due and owing on the Senior Debt or Guarantor
<PAGE> 128
Senior Debt, as the case may be, if any, received from the holders of Senior
Debt or Guarantor Senior Debt (or their Representatives), as the case may be,
or, if such information is not received from such holders or their
Representatives, from the Company and only amounts included in the information
provided to the Trustee shall be paid to the holders of Senior Debt or Guarantor
Senior Debt, as the case may be. The Company shall keep complete and accurate
records of the names, addresses and amounts owed to all holders of Senior Debt
and Guarantor Senior Debt, shall produce such records to the Trustee upon
request and the Trustee shall be absolutely protected in relying on such records
in paying over or delivering moneys pursuant to this Article Twelve.
Nothing contained in this Article Twelve shall limit or
compromise the right of the Trustee or the Holders to take any action to
accelerate the maturity of the Securities pursuant to Section 6.02 or to pursue
any rights or remedies hereunder or otherwise; PROVIDED, HOWEVER, that all
Senior Debt and Guarantor Senior Debt of the applicable Guarantor thereafter due
or declared to be due shall first be paid in full in cash or Cash Equivalents
before the Holders are entitled to receive any payment of any kind or character
with respect to Obligations on the Securities or the Guarantee of the applicable
Guarantor, as the case may be.
SECTION 12.03. PAYMENT OVER OF PROCEEDS UPON DISSOLUTION, ETC.
(a) Upon any payment or distribution of assets of the
Company or a Guarantor of any kind or character, whether in cash, property or
securities to creditors upon any liquidation, dissolution, winding-up,
reorganization, assignment for the benefit of creditors or marshaling of assets
of the Company or such Guarantor or in a bankruptcy, reorganization, insolvency,
receivership or other similar proceeding relating to the Company or its property
or such Guarantor or its property, whether voluntary or involuntary, all
Obligations due or to become due upon all Senior Debt or Guarantor Senior Debt
of such Guarantor, as the case may be, shall first be paid in full in cash or
Cash Equivalents, or such payment shall be duly
<PAGE> 129
provided for to the satisfaction of the holders of Senior Debt or Guarantor
Senior Debt of such Guarantor, as the case may be, before any payment or
distribution of any kind or character is made on account of any Obligations on
the Securities or the Guarantee of such Guarantor, as the case may be, or for
the acquisition of any of the Securities for cash or property or otherwise. Upon
any such dissolution, winding-up, liquidation, reorganization, receivership or
similar proceeding, any payment or distribution of assets of the Company or a
Guarantor of any kind or character, whether in cash, property or securities, to
which the Holders or the Trustee under this Indenture would be entitled, except
for the provisions hereof, shall be paid by the Company or such Guarantor or by
any receiver, trustee in bankruptcy, liquidating trustee, agent or other Person
making such payment or distribution, or by the Holders or by the Trustee under
this Indenture if received by them, directly to the holders of Senior Debt or
Guarantor Senior Debt of such Guarantor, as the case may be (PRO RATA to such
holders on the basis of the respective amounts of Senior Debt or Guarantor
Senior Debt of such Guarantor, as the case may be, held by such holders) or
their respective Representatives, or to the trustee or trustees under any
indenture pursuant to which any of such Senior Debt or Guarantor Senior Debt of
such Guarantor, as the case may be, may have been issued, as their respective
interests may appear, for application to the payment of Senior Debt or Guarantor
Senior Debt of such Guarantor, as the case may be, remaining unpaid until all
such Senior Debt or Guarantor Senior Debt of such Guarantor, as the case may be,
has been paid in full in cash or Cash Equivalents after giving effect to any
concurrent payment, distribution or provision therefor to or for the holders of
Senior Debt or Guarantor Senior Debt of such Guarantor, as the case may be.
(b) To the extent any payment of Senior Debt or Guarantor
Senior Debt (whether by or on behalf of the Company or a Guarantor, as proceeds
of security or enforcement of any right of setoff or otherwise) is declared to
be fraudulent or preferential, set aside or required to be paid to any receiver,
trustee in bankruptcy, liquidating trustee, agent or other similar Person under
any bankruptcy, insolvency, receivership,
<PAGE> 130
fraudulent conveyance or similar law, then, if such payment is recovered by, or
paid over to, such receiver, trustee in bankruptcy, liquidating trustee, agent
or other similar Person, the Senior Debt or Guarantor Senior Debt or part
thereof originally intended to be satisfied shall be deemed to be reinstated and
outstanding as if such payment had not occurred.
(c) In the event that, notwithstanding the foregoing, any
payment or distribution of assets of the Company or a Guarantor of any kind or
character, whether in cash, property or securities, shall be received by any
Holder when such payment or distribution is prohibited by Section 12.03(a), such
payment or distribution shall be held in trust for the benefit of, and shall be
paid over or delivered to, the holders of Senior Debt or Guarantor Senior Debt
of such Guarantor, as the case may be (PRO RATA to such holders on the basis of
the respective amount of Senior Debt or Guarantor Senior Debt of such Guarantor,
as the case may be, held by such holders) or their respective Representatives,
or to the trustee or trustees under any indenture pursuant to which any of such
Senior Debt or Guarantor Senior Debt of such Guarantor, as the case may be, may
have been issued, as their respective interests may appear, for application to
the payment of Senior Debt or Guarantor Senior Debt of such Guarantor, as the
case may be, remaining unpaid until all such Senior Debt or Guarantor Senior
Debt of such Guarantor, as the case may be, has been paid in full in cash or
Cash Equivalents, after giving effect to any concurrent payment, distribution or
provision therefor to or for the holders of such Senior Debt or Guarantor Senior
Debt of such Guarantor, as the case may be.
(d) The consolidation of the Company with, or the merger
of the Company with or into, another corporation or the liquidation or
dissolution of the Company following the conveyance or transfer of all or
substantially all of its assets, to another corporation upon the terms and
conditions provided in Article Five hereof shall not be deemed a dissolution,
winding-up, liquidation or reorganization for the purposes of this Section if,
in the event the Company is not the surviving corporation, such other
corporation shall, as a part of such consolidation, merger, conveyance or
transfer,
<PAGE> 131
assume the Company's obligations hereunder in accordance with Article Five
hereof.
SECTION 12.04. PAYMENTS MAY BE PAID PRIOR TO DISSOLUTION.
Nothing contained in this Article Twelve or elsewhere in this
Indenture shall prevent (i) the Company, except under the conditions described
in Sections 12.02 and 12.03, from making payments at any time for the purpose of
making payments of principal of and interest on the Securities, or from
depositing with the Trustee any monies for such payments, or (ii) in the absence
of actual knowledge by the Trustee that a given payment would be prohibited by
Section 12.02 or 12.03, the application by the Trustee of any monies deposited
with it for the purpose of making such payments of principal of, and interest
on, the Securities to the Holders entitled thereto unless at least one Business
Day prior to the date upon which such payment would otherwise become due and
payable, the Trustee shall have received the written notice provided for in
Section 12.02(a) or in Section 12.07. The Company shall give prompt written
notice to the Trustee of any dissolution, winding-up, liquidation or
reorganization of the Company.
SECTION 12.05. SUBROGATION.
Subject to the payment in full in cash or Cash Equivalents of
all Senior Debt and Guarantor Senior Debt, the Holders shall be subrogated to
the rights of the holders of Senior Debt and Guarantor Senior Debt to receive
payments or distributions of cash, property or securities of the Company and
such Guarantor applicable to the Senior Debt and Guarantor Senior Debt until the
Securities shall be paid in full; and, for the purposes of such subrogation, no
such payments or distributions to the holders of the Senior Debt and Guarantor
Senior Debt by or on behalf of the Company or any Guarantor or by or on behalf
of the Holders by virtue of this Article Twelve which otherwise would have been
made to the Holders shall, as between the Company or any Guarantor and the
Holders, be deemed to be a payment by the Company or any Guarantor to or on
account of the Senior Debt or Guarantor Senior Debt, as the
<PAGE> 132
case may be, it being understood that the provisions of this Article Twelve are
and are intended solely for the purpose of defining the relative rights of the
Holders, on the one hand, and the holders of the Senior Debt or Guarantor Senior
Debt, as the case may be, on the other hand.
SECTION 12.06. OBLIGATIONS OF THE COMPANY UNCONDITIONAL.
Nothing contained in this Article Twelve or elsewhere in this
Indenture or in the Securities or Guarantees is intended to or shall impair, as
among the Company, any Guarantor, their respective creditors other than the
holders of Senior Debt or Guarantor Senior Debt, and the Holders, the obligation
of the Company and any Guarantors, which is absolute and unconditional, to pay
to the Holders the principal of and any interest on the Securities as and when
the same shall become due and payable in accordance with their terms, or is
intended to or shall affect the relative rights of the Holders and creditors of
the Company and any Guarantors other than the holders of any Senior Debt or
Guarantor Senior Debt, nor shall anything herein or therein prevent the Holders
or the Trustee on their behalf from exercising all remedies otherwise permitted
by applicable law upon default under this Indenture, subject to the rights, if
any, under this Article Twelve of the holders of Senior Debt or Guarantor Senior
Debt in respect of cash, property or securities of the Company or any Guarantor
received upon the exercise of any such remedy.
SECTION 12.07. NOTICE TO TRUSTEE.
The Company shall give prompt written notice to the Trustee of
any fact known to the Company which would prohibit the making of any payment to
or by the Trustee in respect of the Securities pursuant to the provisions of
this Article Twelve. Regardless of anything to the contrary contained in this
Article Twelve or elsewhere in this Indenture, the Trustee shall not be charged
with knowledge of the existence of any default or event of default with respect
to any Senior Debt or Guarantor Senior Debt or of any other facts which would
prohibit the making of any payment to or by the Trustee unless
<PAGE> 133
and until the Trustee shall have received notice in writing from the Company, or
from a holder of Senior Debt or Guarantor Senior Debt or a Representative
therefor, and, prior to the receipt of any such written notice, the Trustee
shall be entitled to assume (in the absence of actual knowledge of a Responsible
Officer to the contrary) that no such facts exist.
In the event that the Trustee determines in good faith that
any evidence is required with respect to the right of any Person as a holder of
Senior Debt or Guarantor Senior Debt to participate in any payment or
distribution pursuant to this Article Twelve, the Trustee may request such
Person to furnish evidence to the reasonable satisfaction of the Trustee as to
the amounts of Senior Debt or Guarantor Senior Debt held by such Person, the
extent to which such Person is entitled to participate in such payment or
distribution and any other facts pertinent to the rights of such Person under
this Article Twelve, and if such evidence is not furnished the Trustee may defer
any payment to such Person pending judicial determination as to the right of
such person to receive such payment.
SECTION 12.08. RELIANCE ON JUDICIAL ORDER OR CERTIFICATE OF LIQUIDATING AGENT.
Upon any payment or distribution of assets of the Company or
Guarantor referred to in this Article Twelve, the Trustee, subject to the
provisions of Article Seven hereof, and the Holders shall be entitled to rely
upon any order or decree made by any court of competent jurisdiction in which
bankruptcy, dissolution, winding-up, liquidation or reorganization proceedings
are pending, or upon a certificate of the receiver, trustee in bankruptcy,
liquidating trustee, agent or other person making such payment or distribution,
delivered to the Trustee or the Holders, for the purpose of ascertaining the
persons entitled to participate in such distribution, the holders of the Senior
Debt or Guarantor Senior Debt and other Indebtedness of the Company, the amount
thereof or payable thereon, the amount or amounts paid or distributed thereon
and all other facts pertinent thereto or to this Article Twelve.
<PAGE> 134
SECTION 12.09. TRUSTEE'S RELATION TO SENIOR DEBT OR GUARANTOR SENIOR DEBT.
The Trustee and any agent of the Company or the Trustee shall
be entitled to all the rights set forth in this Article Twelve with respect to
any Senior Debt or Guarantor Senior Debt which may at any time be held by it in
its individual capacity or any other capacity to the same extent as any other
holder of Senior Debt or Guarantor Senior Debt and nothing in this Indenture
shall deprive the Trustee or any such agent of any of its rights as such holder.
The Trustee shall not be liable to any holder of Senior Debt or Guarantor Senior
Debt if it shall mistakenly pay over or deliver to the Holders, the Company or
any other Person monies or assets to which any such holder of the Senior Debt or
Guarantor Senior Debt shall be entitled by virtue of this Article Twelve.
With respect to the holders of Senior Debt or Guarantor Senior
Debt, the Trustee undertakes to perform or to observe only such of its covenants
and obligations as are specifically set forth in this Article Twelve, and no
implied covenants or obligations with respect to the holders of Senior Debt or
Guarantor Senior Debt shall be read into this Indenture against the Trustee. The
Trustee shall not be deemed to owe any fiduciary duty to the holders of Senior
Debt or Guarantor Senior Debt.
Whenever a distribution is to be made or a notice given to
holders or owners of Senior Debt or Guarantor Senior Debt, the distribution may
be made and the notice may be given to their Representative, if any.
SECTION 12.10. SUBORDINATION RIGHTS NOT IMPAIRED BY ACTS OR OMISSIONS OF THE
COMPANY OR A GUARANTOR OR HOLDERS OF SENIOR DEBT.
No right of any present or future holders of any Senior Debt
or Guarantor Senior Debt to enforce subordination as provided herein shall at
any time in any way be prejudiced or impaired by any act or failure to act on
the part of the Company or a Guarantor or by any act or failure to act, in good
<PAGE> 135
faith, by any such holder, or by any noncompliance by the Company or a Guarantor
with the terms of this Indenture, regardless of any knowledge thereof which any
such holder may have or otherwise be charged with.
Without in any way limiting the generality of the foregoing
paragraph, the holders of Senior Debt or Guarantor Senior Debt may, at any time
and from time to time, without the consent of or notice to the Trustee, without
incurring responsibility to the Trustee or the Holders and without impairing or
releasing the subordination provided in this Article Twelve or the obligations
hereunder of the Holders to the holders of the Senior Debt or Guarantor Senior
Debt, do any one or more of the following: (i) change the manner, place or terms
of payment or extend the time of payment of, or renew or alter, Senior Debt or
Guarantor Senior Debt, or otherwise amend or supplement in any manner Senior
Debt or Guarantor Senior Debt, or any instrument evidencing or securing the same
or any agreement under which Senior Debt or Guarantor Senior Debt is
outstanding; (ii) sell, exchange, release or otherwise deal with any property
pledged, mortgaged or otherwise securing Senior Debt or Guarantor Senior Debt;
(iii) release any Person liable in any manner for the payment or collection of
Senior Debt or Guarantor Senior Debt; and (iv) exercise or refrain from
exercising any rights against the Company or a Guarantor or any other Person.
SECTION 12.11. HOLDERS AUTHORIZE TRUSTEE TO EFFECTUATE SUBORDINATION OF
SECURITIES.
Each Holder by its acceptance of the Securities authorizes and
expressly directs the Trustee on its behalf to take such action as may be
necessary or appropriate to effectuate, as between the holders of Senior Debt or
Guarantor Senior Debt and the Holders, the subordination provided in this
Article Twelve, and appoints the Trustee its attorney-in-fact for such purposes,
including, in the event of any dissolution, winding-up, liquidation or
reorganization of the Company or a Guarantor (whether in bankruptcy, insolvency,
receivership, reorganization or similar proceedings or upon an assignment for
the benefit of creditors or otherwise) tending towards
<PAGE> 136
liquidation of the business and assets of the Company or a Guarantor, the filing
of a claim for the unpaid balance of its Securities and accrued interest in the
form required in those proceedings.
If the Trustee does not file a proper claim or proof of debt
in the form required in such proceeding prior to 30 days before the expiration
of the time to file such claim or claims, then the holders of the Senior Debt or
Guarantor Senior Debt or their Representative are or is hereby authorized to
have the right to file and are or is hereby authorized to file an appropriate
claim for and on behalf of the Holders of said Securities. Nothing herein
contained shall be deemed to authorize the Trustee or the holders of Senior Debt
or Guarantor Senior Debt or their Representative to authorize or consent to or
accept or adopt on behalf of any Holder any plan of reorganization, arrangement,
adjustment or composition affecting the Securities or the rights of any Holder
thereof, or to authorize the Trustee or the holders of Senior Debt or Guarantor
Senior Debt or their Representative to vote in respect of the claim of any
Holder in any such proceeding.
SECTION 12.12. THIS ARTICLE TWELVE NOT TO PREVENT EVENTS OF DEFAULT.
The failure to make a payment on account of principal of or
interest on the Securities by reason of any provision of this Article Twelve
will not be construed as preventing the occurrence of an Event of Default.
SECTION 12.13. TRUSTEE'S COMPENSATION NOT PREJUDICED.
Nothing in this Article Twelve will apply to amounts due to
the Trustee pursuant to other Sections in this Indenture.
<PAGE> 137
SIGNATURES
IN WITNESS WHEREOF, the parties hereto have caused this
Indenture to be duly executed as of the date first written above.
SIMONDS INDUSTRIES INC.
By:
----------------------------------------
Name:
Title:
ARMSTRONG MANUFACTURING COMPANY
By:
----------------------------------------
Name:
Title:
SIMONDS HOLDING COMPANY, INC.
By:
----------------------------------------
Name:
Title:
SIMONDS INDUSTRIES FSC, INC.
By:
----------------------------------------
Name:
Title:
STATE STREET BANK AND TRUST COMPANY,
as Trustee
By:
----------------------------------------
Name:
Title:
<PAGE> 138
EXHIBIT A
[FORM OF SERIES A SECURITY]
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED
OR SOLD EXCEPT AS SET FORTH BELOW. BY ITS ACQUISITION HEREOF, THE HOLDER (1)
REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE
144A UNDER THE SECURITIES ACT) OR (B) IT IS AN INSTITUTIONAL "ACCREDITED
INVESTOR" (AS DEFINED IN RULE 501(a)(1), (2), (3) OR (7) UNDER THE SECURITIES
ACT) (AN "ACCREDITED INVESTOR") OR (C) IT IS NOT A U.S. PERSON AND IS ACQUIRING
THIS SECURITY IN AN OFFSHORE TRANSACTION, (2) AGREES THAT IT WILL NOT WITHIN TWO
YEARS AFTER THE ORIGINAL ISSUANCE OF THIS SECURITY RESELL OR OTHERWISE TRANSFER
THIS SECURITY EXCEPT (A) TO THE ISSUER OR ANY SUBSIDIARY THEREOF, (B) INSIDE THE
UNITED STATES TO A QUALIFIED INSTITUTIONAL BUYER IN COMPLIANCE WITH RULE 144A
UNDER THE SECURITIES ACT, (C) INSIDE THE UNITED STATES TO AN ACCREDITED INVESTOR
THAT, PRIOR TO SUCH TRANSFER, FURNISHES TO THE TRUSTEE A SIGNED LETTER
CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS (THE FORM OF WHICH LETTER CAN
BE OBTAINED FROM THE TRUSTEE), (D) OUTSIDE THE UNITED STATES TO PERSONS OTHER
THAN U.S. PERSONS IN OFFSHORE TRANSACTIONS MEETING THE REQUIREMENTS OF RULE 904
UNDER REGULATION S UNDER THE SECURITIES ACT, (E) PURSUANT TO THE EXEMPTION FROM
REGISTRATION PROVIDED BY RULE 144 UNDER THE SECURITIES ACT (IF AVAILABLE), OR
(F) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND
(3) AGREES THAT IT WILL GIVE TO EACH PERSON TO WHOM THIS SECURITY IS TRANSFERRED
A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. AS USED HEREIN, THE TERMS
"OFFSHORE TRANSACTION," "UNITED STATES" AND "U.S. PERSON" HAVE THE RESPECTIVE
MEANINGS GIVEN TO THEM BY REGULATION S UNDER THE SECURITIES ACT.
A-1
<PAGE> 139
SIMONDS INDUSTRIES INC.
10 1/4% Senior Subordinated Notes
due July 1, 2008, Series A
CUSIP No.:
No. [ ] $[ ]
SIMONDS INDUSTRIES INC., a Delaware corporation (the "Company",
which term includes any successor corporation), for value received promises to
pay to Cede & Co. or registered assigns, the principal sum of [ ] Dollars, on
July 1, 2008.
Interest Payment Dates: January 1 and July 1, commencing
January 1, 1999
Record Dates: December 15 and June 15
Reference is made to the further provisions of this Security
contained herein, which will for all purposes have the same effect as if set
forth at this place.
A-2
<PAGE> 140
IN WITNESS WHEREOF, the Company has caused this Security to be
signed manually or by facsimile by its duly authorized officers.
Dated: July 7, 1998
SIMONDS INDUSTRIES INC.
By:
----------------------------------------
Name:
Title:
By:
----------------------------------------
Name:
Title:
A-3
<PAGE> 141
This is one of the 10 1/4% Senior Subordinated Notes due 2008,
Series A, described in the within-mentioned Indenture.
Dated: July 7, 1998 STATE STREET BANK AND TRUST COMPANY,
as Trustee
By:
----------------------------------------
Name:
Title:
A-4
<PAGE> 142
(REVERSE OF SECURITY)
SIMONDS INDUSTRIES INC.
10 1/4% Senior Subordinated Notes
due July 1, 2008, Series A
1. INTEREST.
SIMONDS INDUSTRIES INC., a Delaware corporation (the
"Company"), promises to pay interest on the principal amount of this Security at
the rate per annum shown above. The Company will pay interest semi-annually on
January 1 and July 1 of each year (an "Interest Payment Date"), commencing
January 1, 1999. Interest on the Securities will accrue from the most recent
date to which interest has been paid or, if no interest has been paid, from July
7, 1998. Interest will be computed on the basis of a 360-day year of twelve
30-day months.
The Company shall pay interest on overdue principal from time
to time on demand at the rate borne by the Securities plus 2% and on overdue
installments of interest (without regard to any applicable grace periods) to the
extent lawful.
2. METHOD OF PAYMENT.
The Company shall pay interest on the Securities (except
defaulted interest) to the persons who are the registered Holders at the close
of business on the Record Date immediately preceding the Interest Payment Date
even if the Securities are canceled on registration of transfer or registration
of exchange after such Record Date. Holders must surrender Securities to a
Paying Agent to collect principal payments. The Company shall pay principal and
interest in money of the United States that at the time of payment is legal
tender for payment of public and private debts. The Company may deliver any such
interest payment to the Paying Agent or to a Holder at the Holder's registered
address.
A-5
<PAGE> 143
3. PAYING AGENT AND REGISTRAR.
Initially, State Street Bank and Trust Company (the "Trustee")
will act as Paying Agent and Registrar. The Company may change any Paying Agent,
Registrar or co-Registrar without notice to the Holders.
4. INDENTURE.
The Company issued the Securities under an Indenture, dated as
of July 7, 1998 (the "Indenture"), among the Company, the Guarantors and the
Trustee. Capitalized terms herein are used as defined in the Indenture unless
otherwise defined herein. The terms of the Securities include those stated in
the Indenture and those made part of the Indenture by reference to the Trust
Indenture Act of 1939 (15 U.S.C. ss.ss. 77aaa-77bbbb) (the "TIA"), as in effect
on the date of the Indenture until such time as the Indenture is qualified under
the TIA, and thereafter as in effect on the date on which the Indenture is
qualified under the TIA. Notwithstanding anything to the contrary herein, the
Securities are subject to all such terms, and Holders of Securities are referred
to the Indenture and the TIA for a statement of them. The Securities are limited
in aggregate principal amount to $150,000,000.
5. OPTIONAL REDEMPTION.
The Securities will be redeemable, at the Company's option, in
whole at any time or in part from time to time, on and after July 1, 2003 at the
following redemption prices (expressed as percentages of the principal amount)
if redeemed during the twelve-month period commencing on July 1 of the years set
forth below, plus, in each case, accrued interest thereon to the date of
redemption:
Year Percentage
---- ----------
2003........................................ 105.125%
2004........................................ 103.417%
2005........................................ 101.708%
2006 and thereafter......................... 100.000%
A-6
<PAGE> 144
6. OPTIONAL REDEMPTION UPON PUBLIC EQUITY OFFERING.
At any time, or from time to time, on or prior to July 1,
2001, the Company may, at its option, use the net cash proceeds of one or more
Public Equity Offerings (as defined) to redeem up to 35% of the Securities
issued at a redemption price equal to 110.250% of the principal amount thereof
plus accrued and unpaid interest, if any, to the date of redemption; PROVIDED
that at least 65% of the principal amount of Securities remains outstanding
immediately after giving effect to any such redemption. In order to effect the
foregoing redemption with the net cash proceeds of a Public Equity Offering, the
Company shall send the redemption notice not later than 90 days after the
consummation of such Public Equity Offering.
As used in the preceding paragraph, "Public Equity Offering"
means an underwritten public offering of Qualified Capital Stock of the Company
pursuant to a registration statement filed with and declared effective by the
SEC in accordance with the Securities Act.
7. NOTICE OF REDEMPTION.
Notice of redemption will be mailed at least 30 days but not
more than 60 days before the Redemption Date to each Holder of Securities to be
redeemed at such Holder's registered address. Securities in denominations of
$1,000 may be redeemed only in whole. The Trustee may select for redemption
portions (equal to $1,000 or any integral multiple thereof) of the principal of
Securities that have denominations larger than $1,000.
If any Security is to be redeemed in part only, the notice of
redemption that relates to such Security shall state the portion of the
principal amount thereof to be redeemed. A new Security in a principal amount
equal to the unredeemed portion thereof will be issued in the name of the Holder
thereof upon cancellation of the original Security. On and after the Redemption
Date, interest will cease to accrue on Securities or portions thereof called for
redemption.
A-7
<PAGE> 145
8. CHANGE OF CONTROL OFFER.
Upon the occurrence of a Change of Control, the Company will
be required to offer to purchase all of the outstanding Securities at a purchase
price equal to 101% of the principal amount thereof plus accrued and unpaid
interest, if any, to the date of repurchase.
9. LIMITATION ON DISPOSITION OF ASSETS.
The Company is, subject to certain conditions, obligated to
make an offer to purchase Securities at 100% of their principal amount plus
accrued and unpaid interest to the date of repurchase with certain net cash
proceeds of certain sales or other dispositions of assets in accordance with the
Indenture.
10. DENOMINATIONS; TRANSFER; EXCHANGE.
The Securities are in registered form, without coupons, in
denominations of $1,000 and integral multiples of $1,000. A Holder shall
register the transfer of or exchange Securities in accordance with the
Indenture. The Registrar may require a Holder, among other things, to furnish
appropriate endorsements and transfer documents and to pay certain transfer
taxes or similar governmental charges payable in connection therewith as
permitted by the Indenture. The Registrar need not register the transfer of or
exchange any Securities or portions thereof selected for redemption, except the
unredeemed portion of any security being redeemed in part.
11. PERSONS DEEMED OWNERS.
The registered Holder of a Security shall be treated as the
owner of it for all purposes.
12. UNCLAIMED FUNDS.
If funds for the payment of principal or interest remain
unclaimed for two years, the Trustee and the Paying Agent will repay the funds
to the Company at its request. After that, all liability of the Trustee and such
Paying Agent with respect to such funds shall cease.
A-8
<PAGE> 146
13. LEGAL DEFEASANCE AND COVENANT DEFEASANCE.
The Company may be discharged from its obligations under the
Indenture and the Securities except for certain provisions thereof, and may be
discharged from its obligations to comply with certain covenants contained in
the Indenture and the Securities, in each case upon satisfaction of certain
conditions specified in the Indenture.
14. AMENDMENT; SUPPLEMENT; WAIVER.
Subject to certain exceptions, the Indenture or the Securities
may be amended or supplemented with the written consent of the Holders of at
least a majority in aggregate principal amount of the Securities then
outstanding, and any existing Default or Event of Default or compliance with any
provision may be waived with the consent of the Holders of a majority in
aggregate principal amount of the Securities then outstanding. Without notice to
or consent of any Holder, the parties thereto may amend or supplement the
Indenture or the Securities to, among other things, cure any ambiguity, defect
or inconsistency, provide for uncertificated Securities in addition to or in
place of certificated Securities or comply with any requirements of the SEC in
connection with the qualification of the Indenture under the TIA, or make any
other change that does not materially adversely affect the rights of any Holder
of a Security.
15. RESTRICTIVE COVENANTS.
The Indenture contains certain covenants that, among other
things, limit the ability of the Company and certain of its subsidiaries to make
restricted payments, to incur indebtedness, to create liens, to issue preferred
or other capital stock of subsidiaries, to sell assets, to permit restrictions
on dividends and other payments by subsidiaries to the Company, to consolidate,
merge or sell all or substantially all of its assets, to engage in transactions
with affiliates or to engage in certain businesses. The limitations are subject
to a number of important qualifications and exceptions.
16. DEFAULTS AND REMEDIES.
If an Event of Default occurs and is continuing, the Trustee
or the Holders of at least 25% in aggregate principal
A-9
<PAGE> 147
amount of Securities then outstanding may declare all the Securities to be due
and payable immediately in the manner and with the effect provided in the
Indenture. Holders of Securities may not enforce the Indenture or the Securities
except as provided in the Indenture. The Trustee is not obligated to enforce the
Indenture or the Securities unless it has received indemnity satisfactory to it.
The Indenture permits, subject to certain limitations therein provided, Holders
of a majority in aggregate principal amount of the Securities then outstanding
to direct the Trustee in its exercise of any trust or power. The Trustee may
withhold from Holders of Securities notice of any continuing Default or Event of
Default (except a Default in payment of principal, premium or interest,
including an accelerated payment) if it determines that withholding notice is in
their interest.
17. TRUSTEE DEALINGS WITH COMPANY.
The Trustee under the Indenture, in its individual or any
other capacity, may become the owner or pledgee of Securities and may otherwise
deal with the Company, its Subsidiaries, any Guarantor and their respective
Affiliates as if it were not the Trustee.
18. NO RECOURSE AGAINST OTHERS.
No stockholder, director, officer, employee or incorporator,
as such, of the Company shall have any liability for any obligation of the
Company under the Securities or the Indenture or for any claim based on, in
respect of or by reason of, such obligations or their creation. Each Holder of a
Security by accepting a Security waives and releases all such liability. The
waiver and release are part of the consideration for the issuance of the
Securities.
19. AUTHENTICATION.
This Security shall not be valid until the Trustee or
authenticating agent signs the certificate of authentication on this Security.
20. ABBREVIATIONS AND DEFINED TERMS.
Customary abbreviations may be used in the name of a Holder of
a Security or an assignee, such as: TEN COM (=
A-10
<PAGE> 148
tenants in common), TEN ENT (= tenants by the entireties), JT TEN (= joint
tenants with right of survivorship and not as tenants in common), CUST (=
Custodian), and U/G/M/A (= Uniform Gifts to Minors Act).
21. CUSIP NUMBERS.
Pursuant to a recommendation promulgated by the Committee on
Uniform Security Identification Procedures, the Company has caused CUSIP numbers
to be printed on the Securities as a convenience to the Holders of the
Securities. No representation is made as to the accuracy of such numbers as
printed on the Securities and reliance may be placed only on the other
identification numbers printed hereon.
22. REGISTRATION RIGHTS.
Pursuant to the Registration Rights Agreement, the Company
will be obligated upon the occurrence of certain events to consummate an
exchange offer pursuant to which the Holder of this Security shall have the
right to exchange this Series A Security for the Company's 10 1/4% Senior
Subordinated Notes due 2008, Series B (the "Series B Securities"), which have
been registered under the Securities Act, in like principal amount and having
terms identical in all material respects as the Series A Securities. The Holders
shall be entitled to receive certain additional interest payments in the event
such exchange offer is not consummated and upon certain other conditions, all
pursuant to and in accordance with the terms of the Registration Rights
Agreement.
23. SUBORDINATION.
The Securities are subordinated in right of payment, in the
manner and to the extent set forth in the Indenture, to the prior payment in
full in cash or Cash Equivalents of all Senior Debt of the Company, whether
outstanding on the date of the Indenture or thereafter created, incurred,
assumed or guaranteed. Each Holder by his acceptance hereof agrees to be bound
by such provisions and authorizes and expressly directs the Trustee, on his
behalf, to take such action as may be necessary or appropriate to effectuate the
subordination provided for in the Indenture and appoints the Trustee his
attorney-in-fact for such purposes.
A-11
<PAGE> 149
The Company will furnish to any Holder of a Security upon
written request and without charge a copy of the Indenture. Requests may be made
to: SIMONDS INDUSTRIES INC., 135 Intervale Road, Fitchburg, Massachusetts 01420,
Attention: Chief Financial Officer.
A-12
<PAGE> 150
GUARANTEE
Each undersigned Guarantor (as defined in the Indenture
referred to in the Security upon which this notation is endorsed and each
referred to as the "Guarantor," which term includes any successor person under
the Indenture) unconditionally guarantees on a senior subordinated basis as set
forth in Article Twelve of the Indenture (such guarantee by the Guarantor being
referred to herein as a "Guarantee") (i) the due and punctual payment of the
principal of and interest on the Securities, whether at maturity, by
acceleration or otherwise, the due and punctual payment of interest on the
overdue principal and interest, if any, on the Securities, to the extent lawful,
and the due and punctual performance of all other obligations of the Company to
the Holders or the Trustee all in accordance with the terms set forth in Article
Ten of the Indenture and (ii) in case of any extension of time of payment or
renewal of any Securities or any of such other obligations, that the same will
be promptly paid in full when due or performed in accordance with the terms of
the extension or renewal, whether at stated maturity, by acceleration or
otherwise.
No stockholder, officer, director or incorporator, as such,
past, present or future, of the Guarantor shall have any liability under the
Guarantee by reason of his or its status as such stockholder, officer, director
or incorporator.
The Guarantee shall not be valid or obligatory for any purpose
until the certificate of authentication on the Securities upon which the
Guarantee is noted shall have been executed by the Trustee under the Indenture
by the manual signature of one of its authorized officers.
ARMSTRONG MANUFACTURING COMPANY
By:
----------------------------------------
Name:
Title:
A-13
<PAGE> 151
By:
----------------------------------------
Name:
Title:
A-14
<PAGE> 152
SIMONDS HOLDING COMPANY, INC.
By:
----------------------------------------
Name:
Title:
By:
----------------------------------------
Name:
Title:
SIMONDS INDUSTRIES FSC, INC.
By:
----------------------------------------
Name:
Title:
By:
----------------------------------------
Name:
Title:
A-15
<PAGE> 153
ASSIGNMENT FORM
I or we assign and transfer this Security to
________________________________________________________________________________
________________________________________________________________________________
(Print or type name, address and zip code of assignee or transferee)
________________________________________________________________________________
(Insert Social Security or other identifying number of assignee or transferee)
and irrevocably appoint ________________________________________________________
agent to transfer this Security on the books of the Company. The agent may
substitute another to act for him.
Dated: _________________ Signed: _________________________________
(Sign exactly as name appears on
the other side of this Security)
Signature Guarantee: ___________________________________________________________
Participant in a recognized Signature Guarantee Medallion
Program (or other signature guarantor reasonably acceptable
to the Trustee)
A-16
<PAGE> 154
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Security purchased by the
Company pursuant to Section 4.12 or Section 4.24 of the Indenture, check the
appropriate box:
Section 4.12 [ ] Section 4.24 [ ]
If you want to elect to have only part of this Security
purchased by the Company pursuant to Section 4.12 or Section 4.24 of the
Indenture, state the amount: $_____________
Date: ________________ Your Signature: _______________________________________
(Sign exactly as
your name appears
on the other side
of this Security)
Signature Guarantee: ___________________________________________________________
A-17
<PAGE> 155
EXHIBIT B
[FORM OF SERIES B SECURITY]
SIMONDS INDUSTRIES INC.
10 1/4% Senior Subordinated Notes
due July 1, 2008, Series B
CUSIP No.: [ ]
No. [ ] $[ ]
SIMONDS INDUSTRIES INC., a Delaware corporation (the
"Company", which term includes any successor corporation), for value received
promises to pay to Cede & Co. or registered assigns, the principal sum of [ ]
Dollars, on July 1, 2008.
Interest Payment Dates: January 1 and July 1, commencing
January 1, 1999
Record Dates: December 15 and June 15
Reference is made to the further provisions of this Security
contained herein, which will for all purposes have the same effect as if set
forth at this place.
B-1
<PAGE> 156
IN WITNESS WHEREOF, the Company has caused this Security to be
signed manually or by facsimile by its duly authorized officers.
Dated:
SIMONDS INDUSTRIES INC.
By:
----------------------------------------
Name:
Title:
By:
----------------------------------------
Name:
Title:
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<PAGE> 157
This is one of the 10 1/4% Senior Subordinated Notes due 2008,
Series B, described in the within-mentioned Indenture.
Dated: STATE STREET BANK AND TRUST COMPANY,
as Trustee
By:
----------------------------------------
Authorized Signatory
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(REVERSE OF SECURITY)
SIMONDS INDUSTRIES INC.
10 1/4% Senior Subordinated Notes
due July 1, 2008, Series B
1. INTEREST.
SIMONDS INDUSTRIES INC., a Delaware corporation (the
"Company"), promises to pay interest on the principal amount of this Security at
the rate per annum shown above. The Company will pay interest semi-annually on
January 1 and July 1 of each year (an "Interest Payment Date"), commencing
January 1, 1999. Interest on the Securities will accrue from the most recent
date to which interest has been paid or, if no interest has been paid, from July
7, 1998. Interest will be computed on the basis of a 360-day year of twelve
30-day months.
The Company shall pay interest on overdue principal from time
to time on demand at the rate borne by the Securities plus 2% and on overdue
installments of interest (without regard to any applicable grace periods) to the
extent lawful.
2. METHOD OF PAYMENT.
The Company shall pay interest on the Securities (except
defaulted interest) to the persons who are the registered Holders at the close
of business on the Record Date immediately preceding the Interest Payment Date
even if the Securities are canceled on registration of transfer or registration
of exchange after such Record Date. Holders must surrender Securities to a
Paying Agent to collect principal payments. The Company shall pay principal and
interest in money of the United States that at the time of payment is legal
tender for payment of public and private debts. The Company may deliver any such
interest payment to the Paying Agent or to a Holder at the Holder's registered
address.
3. PAYING AGENT AND REGISTRAR.
Initially, State Street Bank and Trust Company (the "Trustee")
will act as Paying Agent and Registrar. The Company
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may change any Paying Agent, Registrar or co-Registrar without notice to the
Holders.
4. INDENTURE.
The Company issued the Securities under an Indenture, dated as
of July 7, 1998 (the "Indenture"), among the Company, the Guarantors and the
Trustee. Capitalized terms herein are used as defined in the Indenture unless
otherwise defined herein. The terms of the Securities include those stated in
the Indenture and those made part of the Indenture by reference to the Trust
Indenture Act of 1939 (15 U.S.C. secs. 77aaa-77bbbb) (the "TIA"), as in effect
on the date of the Indenture until such time as the Indenture is qualified under
the TIA, and thereafter as in effect on the date on which the Indenture is
qualified under the TIA. Notwithstanding anything to the contrary herein, the
Securities are subject to all such terms, and Holders of Securities are referred
to the Indenture and the TIA for a statement of them. The Securities are limited
in aggregate principal amount to $150,000,000.
5. OPTIONAL REDEMPTION.
The Securities will be redeemable, at the Company's option, in
whole at any time or in part from time to time, on and after July 1, 2003 at the
following redemption prices (expressed as percentages of the principal amount)
if redeemed during the twelve-month period commencing on July 1 of the years set
forth below, plus, in each case, accrued interest thereon to the date of
redemption:
Year Percentage
---- ----------
2003........................................ 105.125%
2004........................................ 103.417%
2005........................................ 101.708%
2006 and thereafter......................... 100.000%
6. OPTIONAL REDEMPTION UPON PUBLIC EQUITY OFFERING.
At any time, or from time to time, on or prior to July 1,
2001, the Company may, at its option, use the net cash proceeds of one or more
Public Equity Offerings (as defined) to redeem up to 35% of the Securities
issued at a redemption price equal to 110.250% of the principal amount thereof
plus accrued
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and unpaid interest, if any, to the date of redemption; PROVIDED that at least
65% of the principal amount of Securities remains outstanding immediately after
giving effect to any such redemption. In order to effect the foregoing
redemption with the net cash proceeds of a Public Equity Offering, the Company
shall send the redemption notice not later than 90 days after the consummation
of such Public Equity Offering.
As used in the preceding paragraph, "Public Equity Offering"
means an underwritten public offering of Qualified Capital Stock of the Company
pursuant to a registration statement filed with and declared effective by the
SEC in accordance with the Securities Act.
7. NOTICE OF REDEMPTION.
Notice of redemption will be mailed at least 30 days but not
more than 60 days before the Redemption Date to each Holder of Securities to be
redeemed at such Holder's registered address. Securities in denominations of
$1,000 may be redeemed only in whole. The Trustee may select for redemption
portions (equal to $1,000 or any integral multiple thereof) of the principal of
Securities that have denominations larger than $1,000.
If any Security is to be redeemed in part only, the notice of
redemption that relates to such Security shall state the portion of the
principal amount thereof to be redeemed. A new Security in a principal amount
equal to the unredeemed portion thereof will be issued in the name of the Holder
thereof upon cancellation of the original Security. On and after the Redemption
Date, interest will cease to accrue on Securities or portions thereof called for
redemption.
8. CHANGE OF CONTROL OFFER.
Upon the occurrence of a Change of Control, the Company will
be required to offer to purchase all of the outstanding Securities at a purchase
price equal to 101% of the principal amount thereof plus accrued and unpaid
interest, if any, to the date of repurchase.
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9. LIMITATION ON DISPOSITION OF ASSETS.
The Company is, subject to certain conditions, obligated to
make an offer to purchase Securities at 100% of their principal amount plus
accrued and unpaid interest to the date of repurchase with certain net cash
proceeds of certain sales or other dispositions of assets in accordance with the
Indenture.
10. DENOMINATIONS; TRANSFER; EXCHANGE.
The Securities are in registered form, without coupons, in
denominations of $1,000 and integral multiples of $1,000. A Holder shall
register the transfer of or exchange Securities in accordance with the
Indenture. The Registrar may require a Holder, among other things, to furnish
appropriate endorsements and transfer documents and to pay certain transfer
taxes or similar governmental charges payable in connection therewith as
permitted by the Indenture. The Registrar need not register the transfer of or
exchange any Securities or portions thereof selected for redemption, except the
unredeemed portion of any security being redeemed in part.
11. PERSONS DEEMED OWNERS.
The registered Holder of a Security shall be treated as the
owner of it for all purposes.
12. UNCLAIMED FUNDS.
If funds for the payment of principal or interest remain
unclaimed for two years, the Trustee and the Paying Agent will repay the funds
to the Company at its request. After that, all liability of the Trustee and such
Paying Agent with respect to such funds shall cease.
13. LEGAL DEFEASANCE AND COVENANT DEFEASANCE.
The Company may be discharged from its obligations under the
Indenture and the Securities except for certain provisions thereof, and may be
discharged from its obligations to comply with certain covenants contained in
the Indenture and the Securities, in each case upon satisfaction of certain
conditions specified in the Indenture.
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<PAGE> 162
14. AMENDMENT; SUPPLEMENT; WAIVER.
Subject to certain exceptions, the Indenture or the Securities
may be amended or supplemented with the written consent of the Holders of at
least a majority in aggregate principal amount of the Securities then
outstanding, and any existing Default or Event of Default or compliance with any
provision may be waived with the consent of the Holders of a majority in
aggregate principal amount of the Securities then outstanding. Without notice to
or consent of any Holder, the parties thereto may amend or supplement the
Indenture or the Securities to, among other things, cure any ambiguity, defect
or inconsistency, provide for uncertificated Securities in addition to or in
place of certificated Securities or comply with any requirements of the SEC in
connection with the qualification of the Indenture under the TIA, or make any
other change that does not materially adversely affect the rights of any Holder
of a Security.
15. RESTRICTIVE COVENANTS.
The Indenture contains certain covenants that, among other
things, limit the ability of the Company and certain of its subsidiaries to make
restricted payments, to incur indebtedness, to create liens, to issue preferred
or other capital stock of subsidiaries, to sell assets, to permit restrictions
on dividends and other payments by subsidiaries to the Company, to consolidate,
merge or sell all or substantially all of its assets, to engage in transactions
with affiliates or to engage in certain businesses. The limitations are subject
to a number of important qualifications and exceptions.
16. DEFAULTS AND REMEDIES.
If an Event of Default occurs and is continuing, the Trustee
or the Holders of at least 25% in aggregate principal amount of Securities then
outstanding may declare all the Securities to be due and payable immediately in
the manner and with the effect provided in the Indenture. Holders of Securities
may not enforce the Indenture or the Securities except as provided in the
Indenture. The Trustee is not obligated to enforce the Indenture or the
Securities unless it has received indemnity satisfactory to it. The Indenture
permits, subject to certain limitations therein provided,
B-8
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Holders of a majority in aggregate principal amount of the Securities then
outstanding to direct the Trustee in its exercise of any trust or power. The
Trustee may withhold from Holders of Securities notice of any continuing Default
or Event of Default (except a Default in payment of principal, premium or
interest, including an accelerated payment) if it determines that withholding
notice is in their interest.
17. TRUSTEE DEALINGS WITH COMPANY.
The Trustee under the Indenture, in its individual or any
other capacity, may become the owner or pledgee of Securities and may otherwise
deal with the Company, its Subsidiaries, any Guarantor and their respective
Affiliates as if it were not the Trustee.
18. NO RECOURSE AGAINST OTHERS.
No stockholder, director, officer, employee or incorporator,
as such, of the Company shall have any liability for any obligation of the
Company under the Securities or the Indenture or for any claim based on, in
respect of or by reason of, such obligations or their creation. Each Holder of a
Security by accepting a Security waives and releases all such liability. The
waiver and release are part of the consideration for the issuance of the
Securities.
19. AUTHENTICATION.
This Security shall not be valid until the Trustee or
authenticating agent signs the certificate of authentication on this Security.
20. ABBREVIATIONS AND DEFINED TERMS.
Customary abbreviations may be used in the name of a Holder of
a Security or an assignee, such as: TEN COM (= tenants in common), TEN ENT (=
tenants by the entireties), JT TEN (= joint tenants with right of survivorship
and not as tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts
to Minors Act).
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<PAGE> 164
21. CUSIP NUMBERS.
Pursuant to a recommendation promulgated by the Committee on
Uniform Security Identification Procedures, the Company has caused CUSIP numbers
to be printed on the Securities as a convenience to the Holders of the
Securities. No representation is made as to the accuracy of such numbers as
printed on the Securities and reliance may be placed only on the other
identification numbers printed hereon.
22. SUBORDINATION.
The Securities are subordinated in right of payment, in the
manner and to the extent set forth in the Indenture, to the prior payment in
full, in cash or Cash Equivalents of all Senior Debt of the Company, whether
outstanding on the date of the Indenture or thereafter created, incurred,
assumed or guaranteed. Each Holder by his acceptance hereof agrees to be bound
by such provisions and authorizes and expressly directs the Trustee, on his
behalf, to take such action as may be necessary or appropriate to effectuate the
subordination provided for in the Indenture and appoints the Trustee his
attorney-in-fact for such purposes.
The Company will furnish to any Holder of a Security upon
written request and without charge a copy of the Indenture. Requests may be made
to: SIMONDS INDUSTRIES INC., 135 Intervale Road, Fitchburg, Massachusetts 01420,
Attention: Chief Financial Officer.
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GUARANTEE
Each undersigned Guarantor (as defined in the Indenture
referred to in the Security upon which this notation is endorsed and each
referred to as the "Guarantor," which term includes any successor person under
the Indenture) unconditionally guarantees on a senior subordinated basis as set
forth in Article Twelve of the Indenture (such guarantee by the Guarantor being
referred to herein as a "Guarantee") (i) the due and punctual payment of the
principal of and interest on the Securities, whether at maturity, by
acceleration or otherwise, the due and punctual payment of interest on the
overdue principal and interest, if any, on the Securities, to the extent lawful,
and the due and punctual performance of all other obligations of the Company to
the Holders or the Trustee all in accordance with the terms set forth in Article
Ten of the Indenture and (ii) in case of any extension of time of payment or
renewal of any Securities or any of such other obligations, that the same will
be promptly paid in full when due or performed in accordance with the terms of
the extension or renewal, whether at stated maturity, by acceleration or
otherwise.
No stockholder, officer, director or incorporator, as such,
past, present or future, of the Guarantor shall have any liability under the
Guarantee by reason of his or its status as such stockholder, officer, director
or incorporator.
The Guarantee shall not be valid or obligatory for any purpose
until the certificate of authentication on the Securities upon which the
Guarantee is noted shall have been executed by the Trustee under the Indenture
by the manual signature of one of its authorized officers.
ARMSTRONG MANUFACTURING COMPANY
By:
----------------------------------------
Name:
Title:
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<PAGE> 166
By:
----------------------------------------
Name:
Title:
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<PAGE> 167
SIMONDS HOLDING COMPANY, INC.
By:
----------------------------------------
Name:
Title:
By:
----------------------------------------
Name:
Title:
SIMONDS INDUSTRIES FSC, INC.
By:
----------------------------------------
Name:
Title:
By:
----------------------------------------
Name:
Title:
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<PAGE> 168
ASSIGNMENT FORM
I or we assign and transfer this Security to
________________________________________________________________________________
________________________________________________________________________________
(Print or type name, address and zip code of assignee or transferee)
________________________________________________________________________________
(Insert Social Security or other identifying number of assignee or transferee)
and irrevocably appoint ________________________________________________________
agent to transfer this Security on the books of the Company. The agent may
substitute another to act for him.
Dated: _________________ Signed: _________________________________
(Sign exactly as name appears on
the other side of this Security)
Signature Guarantee: ___________________________________________________________
Participant in a recognized Signature Guarantee Medallion
Program (or other signature guarantor reasonably acceptable
to the Trustee)
B-14
<PAGE> 169
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Security purchased by the
Company pursuant to Section 4.12 or Section 4.24 of the Indenture, check the
appropriate box:
Section 4.12 [ ] Section 4.24 [ ]
If you want to elect to have only part of this Security
purchased by the Company pursuant to Section 4.12 or Section 4.24 of the
Indenture, state the amount: $_____________
Date: ________________ Your Signature: _______________________________________
(Sign exactly as
your name appears
on the other side
of this Security)
Signature Guarantee: ___________________________________________________________
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<PAGE> 170
EXHIBIT C
FORM OF LEGEND FOR GLOBAL SECURITIES
Any Global Security authenticated and delivered hereunder
shall bear a legend (which would be in addition to any other legends required in
the case of a Restricted Security) in substantially the following form:
THIS SECURITY IS A GLOBAL SECURITY WITHIN THE MEANING OF THE
INDENTURE HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF A
DEPOSITORY OR A NOMINEE OF A DEPOSITORY OR A SUCCESSOR DEPOSITORY. THIS
SECURITY IS NOT EXCHANGEABLE FOR SECURITIES REGISTERED IN THE NAME OF A
PERSON OTHER THAN THE DEPOSITORY OR ITS NOMINEE EXCEPT IN THE LIMITED
CIRCUMSTANCES DESCRIBED IN THE INDENTURE, AND NO TRANSFER OF THIS
SECURITY (OTHER THAN A TRANSFER OF THIS SECURITY AS A WHOLE BY THE
DEPOSITORY TO A NOMINEE OF THE DEPOSITORY OR BY A NOMINEE OF THE
DEPOSITORY TO THE DEPOSITORY OR ANOTHER NOMINEE OF THE DEPOSITORY) MAY
BE REGISTERED EXCEPT IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE
INDENTURE.
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION
("DTC"), TO THE ISSUER OR ITS AGENT FOR REGISTRATION OF TRANSFER,
EXCHANGE, OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE
NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO.
OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE
OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED
OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
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EXHIBIT D
CERTIFICATE TO BE DELIVERED UPON EXCHANGE
OR REGISTRATION OF TRANSFER OF SECURITIES
Re: 10 1/4% Senior Subordinated Notes due 2008, Series A, and
10 1/4% Senior Subordinated Notes due 2008, Series B (the
"Securities"), of Simonds Industries Inc.
------------------------------------------------------------
This Certificate relates to $_______ principal amount of
Securities held in the form of* ___ a beneficial interest in a Global Security
or* _______ Physical Securities by ______ (the "Transferor").
The Transferor:*
[ ] has requested by written order that the Registrar deliver in
exchange for its beneficial interest in the Global Security held by the
Depositary a Physical Security or Physical Securities in definitive, registered
form of authorized denominations and an aggregate number equal to its beneficial
interest in such Global Security (or the portion thereof indicated above); or
[ ] has requested by written order that the Registrar exchange or
register the transfer of a Physical Security or Physical Securities.
In connection with such request and in respect of each such
Security, the Transferor does hereby certify that the Transferor is familiar
with the Indenture relating to the above captioned Securities and the
restrictions on transfers thereof as provided in Section 2.16 of such Indenture,
and that the transfer of this Securities does not require registration under the
Securities Act of 1933, as amended (the "Act") because*:
[ ] Such Security is being acquired for the Transferor's own
account, without transfer (in satisfaction of Section 2.16(a)(II)(A) or Section
2.16(d)(i)(A) of the Indenture).
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<PAGE> 172
[ ] Such Security is being transferred to a "qualified
institutional buyer" (as defined in Rule 144A under the Act), in reliance on
Rule 144A.
[ ] Such Security is being transferred to an institutional
"accredited investor" (within the meaning of subparagraphs (a)(1), (2), (3) or
(7) of Rule 501 under the Act.
[ ] Such Security is being transferred in reliance on Regulation
S under the Act
[ ] Such Security is being transferred in reliance on Rule 144
under the Act.
Such Security is being transferred in reliance on and in
compliance with an exemption from the registration requirements of the Act other
than Rule 144A or Rule 144 or Regulation S under the Act to a person other than
an institutional "accredited investor."
---------------------------------------
[INSERT NAME OF TRANSFEROR]
By:
-----------------------------------
[Authorized Signatory]
Date:______________
* Check applicable box.
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<PAGE> 173
EXHIBIT E
FORM OF CERTIFICATE TO BE
DELIVERED IN CONNECTION WITH
TRANSFERS TO INSTITUTIONAL ACCREDITED INVESTORS
---------------, ----
[TRUSTEE]
Attention: [ ]
Re: Simonds Industries Inc. (the "Company") Indenture (the
"Indenture") relating to 10 1/4% Senior Subordinated Notes due
2008, Series A, or 10 1/4% Senior Subordinated Notes due 2008,
Series B
--------------------------------------------------------------
Ladies and Gentlemen:
In connection with our proposed purchase of 10 1/4% Senior
Subordinated Notes due 2008, Series A, or 10 1/4% Senior Subordinated Notes due
2008, Series B (the "Securities"), of Simonds Industries Inc. (the "Company"),
we confirm that:
1. We have received such information as we deem
necessary in order to make our investment decision.
2. We understand that any subsequent transfer of the
Securities is subject to certain restrictions and conditions set forth in the
Indenture and the undersigned agrees to be bound by, and not to resell, pledge
or otherwise transfer the Securities except in compliance with, such
restrictions and conditions and the Securities Act of 1933, as amended (the
"Securities Act").
3. We understand that the offer and sale of the
Securities have not been registered under the Securities Act, and that the
Securities may not be offered or sold within the United States or to, or for the
account or benefit of, U.S. persons except as permitted in the following
sentence. We agree, on our own behalf and on behalf of any accounts for
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<PAGE> 174
which we are acting as hereinafter stated, that if we should sell any
Securities, we will do so only (A) to the Company or any subsidiary thereof, (B)
inside the United States in accordance with Rule 144A under the Securities Act
to a "qualified institutional buyer" (as defined therein), (C) inside the United
States to an institutional "accredited investor" (as defined below) that, prior
to such transfer, furnishes (or has furnished on its behalf by a U.S.
broker-dealer) to the Trustee a signed letter substantially in the form hereof,
(D) outside the United States in accordance with Regulation S under the
Securities Act, (E) pursuant to the exemption from registration provided by Rule
144 under the Securities Act (if available), or (F) pursuant to an effective
registration statement under the Securities Act, and we further agree to provide
to any person purchasing Securities from us a notice advising such purchaser
that resales of the Securities are restricted as stated herein.
4. We understand that, on any proposed resale of
Securities, we will be required to furnish to the Trustee and the Company, such
certification, legal opinions and other information as the Trustee and the
Company may reasonably require to confirm that the proposed sale complies with
the foregoing restrictions. We further understand that the Securities purchased
by us will bear a legend to the foregoing effect.
5. We are an institutional "accredited investor" (as
defined in Rule 501(a)(1), (2), (3) or (7) of Regulation D under the Securities
Act) and have such knowledge and experience in financial and business matters as
to be capable of evaluating the merits and risks of our investment in the
Securities, and we and any accounts for which we are acting are each able to
bear the economic risk of our or their investment, as the case may be.
6. We are acquiring the Securities purchased by us for
our account or for one or more accounts (each of which is an institutional
"accredited investor") as to each of which we exercise sole investment
discretion.
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<PAGE> 175
You and the Company are entitled to rely upon this letter and
are irrevocably authorized to produce this letter or a copy hereof to any
interested party in any administrative or legal proceeding or official inquiry
with respect to the matters covered hereby.
Very truly yours,
[Name of Transferor]
By:
----------------------------------------
[Authorized Signatory]
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<PAGE> 176
EXHIBIT F
FORM OF CERTIFICATE TO BE
DELIVERED IN CONNECTION
WITH REGULATION S TRANSFERS
---------------, ----
[TRUSTEE]
Attention: [ ]
Re: Simonds Industries Inc. (the "Company") 10 1/4% Senior
Subordinated Notes due 2008, Series A, and 10 1/4% Senior
Subordinated Notes due 2008, Series B (the "Securities")
---------------------------------------------------------
Dear Sirs:
In connection with our proposed sale of $____________
aggregate principal amount of the Securities, we confirm that such sale has been
effected pursuant to and in accordance with Regulation S under the Securities
Act of 1933, as amended (the "Securities Act"), and, accordingly, we represent
that:
(1) the offer of the Securities was not made to a person
in the United States;
(2) either (a) at the time the buy offer was originated,
the transferee was outside the United States or we and any person acting on our
behalf reasonably believed that the transferee was outside the United States, or
(b) the transaction was executed in, on or through the facilities of a
designated off-shore securities market and neither we nor any person acting on
our behalf knows that the transaction has been pre-arranged with a buyer in the
United States;
(3) no directed selling efforts have been made in the
United States in contravention of the requirements of Rule 903(b) or Rule 904(b)
of Regulation S, as applicable;
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<PAGE> 177
(4) the transaction is not part of a plan or scheme to
evade the registration requirements of the Securities Act; and
(5) we have advised the transferee of the transfer
restrictions applicable to the Securities.
You and the Company are entitled to rely upon this letter and
are irrevocably authorized to produce this letter or a copy hereof to any
interested party in any administrative or legal proceedings or official inquiry
with respect to the matters covered hereby. Defined terms used herein without
definition have the respective meanings provided in Regulation S.
Very truly yours,
[Name of Transferor]
By:
----------------------------------------
[Authorized Signatory]
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<PAGE> 178
EXHIBIT G
[FORM OF GUARANTEE]
Each undersigned Guarantor (as defined in the Indenture
referred to in the Security upon which this notation is endorsed and each
referred to as the "Guarantor," which term includes any successor person under
the Indenture) unconditionally guarantees on a senior subordinated basis as set
forth in Article Twelve of the Indenture (such guarantee by the Guarantor being
referred to herein as a "Guarantee") (i) the due and punctual payment of the
principal of and interest on the Securities, whether at maturity, by
acceleration or otherwise, the due and punctual payment of interest on the
overdue principal and interest, if any, on the Securities, to the extent lawful,
and the due and punctual performance of all other obligations of the Company to
the Holders or the Trustee all in accordance with the terms set forth in Article
Ten of the Indenture and (ii) in case of any extension of time of payment or
renewal of any Securities or any of such other obligations, that the same will
be promptly paid in full when due or performed in accordance with the terms of
the extension or renewal, whether at stated maturity, by acceleration or
otherwise.
No stockholder, officer, director or incorporator, as such,
past, present or future, of the Guarantor shall have any liability under the
Guarantee by reason of his or its status as such stockholder, officer, director
or incorporator.
The Guarantee shall not be valid or obligatory for any purpose
until the certificate of authentication on the Securities upon which the
Guarantee is noted shall have been executed by the Trustee under the Indenture
by the manual signature of one of its authorized officers.
G-1
<PAGE> 1
EXHIBIT 4.2
EXHIBIT A TO
PURCHASE AGREEMENT
================================================================================
10 1/4% SENIOR SUBORDINATED NOTES DUE 2008
REGISTRATION RIGHTS AGREEMENT
Dated July 7, 1998
by and among
SIMONDS INDUSTRIES INC.,
ARMSTRONG MANUFACTURING COMPANY,
SIMONDS HOLDING COMPANY, INC.,
and
SIMONDS INDUSTRIES FSC, INC.,
and
SALOMON BROTHERS INC,
FIRST UNION CAPITAL MARKETS,
a division of Wheat First Securities, Inc.,
and
SCHRODER & CO. INC.
================================================================================
<PAGE> 2
This Registration Rights Agreement is made and entered into this 7th
day of July, 1998, by and among Simonds Industries Inc., a Delaware corporation
(the "COMPANY"), Armstrong Manufacturing Company, an Oregon corporation, Simonds
Holding Company, Inc., a Delaware corporation, and Simonds Industries FSC, Inc.,
a U.S. Virgin Islands corporation (the "GUARANTORS" and, together with the
Company, the "ISSUERS"), and Salomon Brothers Inc, First Union Capital Markets,
a division of Wheat First Securities Inc., and Schroder & Co. Inc. (the "INITIAL
PURCHASERS").
This Agreement is made pursuant to the Purchase Agreement, dated June
30, 1998, among the Company, the Guarantors and Initial Purchasers (the
"PURCHASE AGREEMENT"). In order to induce the Initial Purchasers to enter into
the Purchase Agreement, the Issuers have agreed to provide the registration
rights provided for in this Agreement to the Initial Purchasers and their direct
and indirect transferees. The execution and delivery of this Agreement is a
condition to the closing of the transactions contemplated by the Purchase
Agreement.
The parties hereby agree as follows:
1. DEFINITIONS
As used in this Agreement, the following terms shall have the
following meanings:
ADDITIONAL INTEREST: As defined in Section 4(a) hereof.
ADVICE: As defined in the last paragraph of Section 5 hereof.
AFFILIATE: With respect to any specified person, "Affiliate" shall
mean any other person directly or indirectly controlling or controlled by or
under direct or indirect common control with such specified person. For the
purposes of this definition, "control," when used with respect to any person,
means the power to direct the management and policies of such
<PAGE> 3
person, directly or indirectly, whether through the ownership of voting
securities, by contract or otherwise, and the terms "affiliated," "controlling"
and "controlled" have meanings correlative to the foregoing.
AGREEMENT: This Registration Rights Agreement, as the same may be
amended, supplemented or modified from time to time in accordance with the terms
hereof.
BUSINESS DAY: Any day except a Saturday, a Sunday or a day on which
banking institutions in New York, New York generally are required or authorized
by law or other government action to be closed.
COMPANY: As defined in the preamble hereof.
CONSUMMATE OR CONSUMMATE: When used to qualify the term "Exchange
Offer" shall mean validly and lawfully to issue and deliver the Exchange Notes
pursuant to the Exchange Offer for all Notes validly tendered and not validly
withdrawn pursuant thereto in accordance with the terms of this Agreement.
CONSUMMATION DATE: The date that is 20 Business Days immediately
following the date that the Exchange Registration Statement shall have been
declared effective by the SEC (or such later date as shall be required by
applicable law).
EFFECTIVENESS PERIOD: As defined in Section 3(a) hereof.
EXCHANGE ACT: The Securities Exchange Act of 1934, as amended, and the
rules and regulations promulgated by the SEC pursuant thereto.
EXCHANGE DATE: As defined in Section 2(d) hereof.
EXCHANGE NOTES: The 10 1/4% Senior Subordinated Notes due 2008, Series
B, of the Company, guaranteed on a senior subordinated basis by each of the
Guarantors, that are identical to the Notes in all material respects, except
that the provisions regarding restrictions on transfer shall be
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<PAGE> 4
modified, as appropriate, and the issuance thereof pursuant to the Exchange
Offer shall have been registered pursuant to an effective Registration Statement
in compliance with the Securities Act.
EXCHANGE OFFER: An offer to issue, in exchange for any and all of the
Notes, a like aggregate principal amount of Exchange Notes, which offer shall be
made by the Company pursuant to Section 2 hereof.
EXCHANGE REGISTRATION STATEMENT: As defined in Section 2(a) hereof.
GUARANTORS: As defined in the preamble hereof.
INDEMNIFIED PERSON: As defined in Section 7(a) hereof.
INDENTURE: The Indenture, dated as of July 7, 1998, among the Issuers
and State Street Bank and Trust Company, as trustee thereunder, pursuant to
which the Notes are issued, as amended or supplemented from time to time in
accordance with the terms thereof.
INITIAL PURCHASERS: As defined in the preamble hereof.
ISSUE DATE: As defined in Section 2(a).
ISSUERS: As defined in the preamble hereof.
NOTES: The 10 1/4% Senior Subordinated Notes due 2008, Series A, of
the Company, guaranteed on a senior subordinated basis by each of the
Guarantors, issued pursuant to the Indenture.
PARTICIPATING BROKER-DEALER: As defined in Section 2(e) hereof.
PRIVATE EXCHANGE: As defined in Section 2(c) hereof.
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<PAGE> 5
PRIVATE EXCHANGE NOTES: As defined in Section 2(c) hereof.
PROSPECTUS: The prospectus included in any Registration Statement
(including, without limitation, a prospectus that discloses information
previously omitted from a prospectus filed as part of an effective registration
statement in reliance upon Rule 430A promulgated pursuant to the Securities
Act), as amended or supplemented by any prospectus supplement, with respect to
the terms of the offering of any portion of the Notes, Exchange Notes or Private
Exchange Notes covered by such Registration Statement, and all other amendments
and supplements to any such prospectus, including post-effective amendments, and
all material incorporated by reference or deemed to be incorporated by
reference, if any, in such prospectus.
REGISTRATION DEFAULT: As defined in Section 4(a) hereof.
REGISTRATION STATEMENT: Any registration statement of the Company and
the Guarantors that covers any of the Notes, Exchange Notes or Private Exchange
Notes pursuant to the provisions of this Agreement, including the Prospectus,
amendments and supplements to such registration statement or Prospectus,
including pre- and post-effective amendments, all exhibits thereto, and all
material incorporated by reference or deemed to be incorporated by reference, if
any, in such registration statement.
RULE 144: Rule 144 promulgated by the SEC pursuant to the Securities
Act, as such Rule may be amended from time to time, or any similar rule or
regulation hereafter adopted by the SEC as a replacement thereto having
substantially the same effect as such Rule.
RULE 144A: Rule 144A promulgated by the SEC pursuant to the Securities
Act, as such Rule may be amended from time to time, or any similar rule or
regulation hereafter adopted by the SEC as a replacement thereto having
substantially the same effect as such Rule.
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<PAGE> 6
RULE 158: Rule 158 promulgated by the SEC pursuant to the Securities
Act, as such Rule may be amended from time to time, or any similar rule or
regulation hereafter adopted by the SEC as a replacement thereto having
substantially the same effect as such Rule.
RULE 174: Rule 174 promulgated by the SEC pursuant to the Securities
Act, as such Rule may be amended from time to time, or any similar rule or
regulation hereafter adopted by the SEC as a replacement thereto having
substantially the same effect as such Rule.
RULE 415: Rule 415 promulgated by the SEC pursuant to the Securities
Act, as such Rule may be amended from time to time, or any similar rule or
regulation hereafter adopted by the SEC as a replacement thereto having
substantially the same effect as such Rule.
RULE 424: Rule 424 promulgated by the SEC pursuant to the Securities
Act, as such Rule may be amended from time to time, or any similar rule or
regulation hereafter adopted by the SEC as a replacement thereto having
substantially the same effect as such Rule.
SEC: The Securities and Exchange Commission.
SECURITIES ACT: The Securities Act of 1933, as amended, and the rules
and regulations promulgated by the SEC thereunder.
SHELF FILING EVENT: As defined in Section 3 hereof.
SHELF REGISTRATION: As defined in Section 3 hereof.
SHELF REGISTRATION STATEMENT: As defined in Section 3 hereof.
SPECIAL COUNSEL: Cahill Gordon & Reindel, special counsel to the
holders of Transfer Restricted Securities, or such other counsel as shall be
agreed upon by the Issuers and holders of a majority in aggregate principal
amount of Transfer Restricted Securities, the expenses of which holders of
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<PAGE> 7
Transfer Restricted Securities will be reimbursed by the Issuers pursuant to
Section 6 hereof.
TIA: The Trust Indenture Act of 1939, as amended.
TRANSFER RESTRICTED SECURITIES: The Notes, upon original issuance
thereof, and at all times subsequent thereto, each Exchange Note as to which
Section 3(a)(iii) hereof is applicable upon original issuance and at all times
subsequent thereto and each Private Exchange Note upon original issuance thereof
and at all times subsequent thereto, until in the case of any such Note,
Exchange Note or Private Exchange Note, as the case may be, the earliest to
occur of (i) the date on which any such Note has been exchanged by a person
other than a Participating Broker-Dealer for an Exchange Note (other than with
respect to an Exchange Note as to which Section 3(a)(iii) hereof applies)
pursuant to the Exchange Offer, (ii) with respect to Exchange Notes received by
Participating Broker-Dealers in the Exchange Offer, the earlier of (x) the date
on which such Exchange Note has been sold by such Participating Broker-Dealer by
means of the Prospectus contained in the Exchange Registration Statement and (y)
the date on which the Exchange Registration Statement has been effective under
the Securities Act for a period of 6 months after the Consummation Date, (iii) a
Shelf Registration Statement covering such Note, Exchange Note or Private
Exchange Note has been declared effective by the SEC and such Note, Exchange
Note or Private Exchange Note, as the case may be, has been disposed of in
accordance with such effective Shelf Registration Statement, (iv) the date on
which such Note, Exchange Note or Private Exchange Note, as the case may be, is
distributed to the public pursuant to Rule 144 (or any similar provisions then
in effect) or is saleable pursuant to Rule 144(k) promulgated by the SEC
pursuant to the Securities Act or (v) the date on which such Note, Exchange Note
or Private Exchange Note, as the case may be, ceases to be outstanding for
purposes of the Indenture or any other indenture under which such Exchange Note
or Private Exchange Note was issued.
TRUSTEE: The trustee under the Indenture.
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<PAGE> 8
UNDERWRITTEN REGISTRATION OR UNDERWRITTEN OFFERING: A registration in
connection with which securities are sold to an underwriter for reoffering to
the public pursuant to an effective Registration Statement.
2. EXCHANGE OFFER
(a) To the extent not prohibited by any applicable law or applicable
interpretation of the staff of the SEC, the Issuers shall (A) prepare and, on or
prior to 60 days after the date of original issuance of the Notes (the "ISSUE
DATE"), file with the SEC a Registration Statement under the Securities Act with
respect to an offer by the Company to the holders of the Notes to issue and
deliver to such holders, in exchange for Notes, a like principal amount of
Exchange Notes, (B) use their best efforts to cause the Registration Statement
relating to the Exchange Offer to be declared effective by the SEC under the
Securities Act on or prior to 120 days after the Issue Date, and (C) commence
the Exchange Offer and use their best efforts to issue, on or prior to the
Consummation Date, the Exchange Notes. The offer and sale of the Exchange Notes
pursuant to the Exchange Offer shall be registered pursuant to the Securities
Act on the appropriate form (the "EXCHANGE REGISTRATION STATEMENT") and duly
registered or qualified under all applicable state securities or Blue Sky laws
and will comply with all applicable tender offer rules and regulations under the
Exchange Act and state securities or Blue Sky laws. The Exchange Offer shall not
be subject to any condition, other than that the Exchange Offer does not violate
any applicable law or interpretation of the staff of the SEC. Upon consummation
of the Exchange Offer in accordance with this Section 2, the Issuers shall have
no further registration obligations other than with respect to (i) Private
Exchange Notes, (ii) Exchange Notes held by Participating Broker-Dealers and
(iii) Notes or Exchange Notes as to which Section 3(a)(iii) hereof applies. No
securities shall be included in the Exchange Registration Statement other than
the Exchange Notes.
(b) The Issuers may require each holder of Notes as a condition to its
participation in the Exchange Offer to represent to the Issuers and their
counsel in writing (which
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<PAGE> 9
may be contained in the applicable letter of transmittal) that at the time of
the consummation of the Exchange Offer (i) any Exchange Notes received by such
holder will be acquired in the ordinary course of its business, (ii) such holder
will have no arrangement or understanding with any person to participate in the
distribution (within the meaning of the Securities Act) of the Exchange Notes
and (iii) such holder is not an Affiliate of an Issuer, or if it is an Affiliate
of an Issuer, it will comply with the registration and prospectus delivery
requirements of the Securities Act, to the extent applicable.
(c) If, prior to consummation of the Exchange Offer, an Initial
Purchaser holds any Notes acquired by it and having, or which are reasonably
likely to be determined to have, the status of an unsold allotment in the
initial distribution, or any other holder of Notes is not entitled to
participate in the Exchange Offer, the Company upon the request of such Initial
Purchaser or any such holder shall, simultaneously with the delivery of the
Exchange Notes in the Exchange Offer, issue and deliver to such Initial
Purchaser and any such holder, in exchange (the "PRIVATE EXCHANGE") for such
Notes held by such Initial Purchaser and any such holder, a like principal
amount of debt securities of the Company, guaranteed by each of the Guarantors
on a senior subordinated basis, that are identical in all material respects to
the Exchange Notes (the "PRIVATE EXCHANGE NOTES") (and which are issued pursuant
to the same indenture as the Exchange Notes). The Private Exchange Notes shall
bear the same CUSIP number as the Exchange Notes.
(d) Unless the Exchange Offer would not be permitted by any applicable
law or interpretation of the staff of the SEC, the Company shall mail the
Exchange Offer Prospectus and appropriate accompanying documents, including
appropriate letters of transmittal, to each holder of Notes providing, in
addition to such other disclosures as are required by applicable law:
(i) that the Exchange Offer is being made pursuant to this Agreement and
that all Notes validly tendered will be accepted for exchange;
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<PAGE> 10
(ii) the date of acceptance for exchange (the "EXCHANGE Date"), which
date shall in no event be later than the Consummation Date (unless otherwise
required by applicable law);
(iii) that holders of Notes electing to have a Note exchanged pursuant to
the Exchange Offer will be required to surrender such Note, together with the
enclosed letters of transmittal, to the institution and at the address
(located in the Borough of Manhattan, The City of New York) specified in the
notice prior to the close of business on the Exchange Date; and
(iv) that holders of Notes that do not tender all such securities
pursuant to the Exchange Offer may no longer have any registration rights
hereunder with respect to Notes not tendered.
Promptly after the Exchange Date, the Company shall:
(i) accept for exchange all Notes or portions thereof validly tendered
and not validly withdrawn pursuant to the Exchange Offer or the Private
Exchange; and
(ii) deliver, or cause to be delivered, to the Trustee for cancellation
all Notes or portions thereof so accepted for exchange by the Company, and
issue, cause the Trustee under the Indenture (or the indenture pursuant to
which the Exchange Notes are issued) to authenticate, and mail to each holder
of Notes, Exchange Notes or Private Exchange Notes equal in principal amount
to the principal amount of the Notes surrendered by such holder.
(e) The Issuers and the Initial Purchasers acknowledge that the staff
of the SEC has taken the position that any broker-dealer that owns Exchange
Notes that were received by such broker-dealer for its own account in the
Exchange Offer (a "PARTICIPATING BROKER-DEALER") may be deemed to be an
"underwriter" within the meaning of the Securities Act and must deliver a
prospectus meeting the requirements of the Securities Act in connection with any
resale of such Exchange
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<PAGE> 11
Notes (other than a resale of an unsold allotment resulting from the original
offering of the Notes).
The Issuers and the Initial Purchasers also acknowledge that it is the
SEC staff's position that if the Prospectus contained in the Exchange
Registration Statement includes a plan of distribution containing a statement to
the above effect and the means by which Participating Broker-Dealers may resell
the Exchange Notes, without naming the Participating Broker-Dealers or
specifying the amount of Exchange Notes owned by them, such Prospectus may be
delivered by Participating Broker-Dealers to satisfy their prospectus delivery
obligations under the Securities Act in connection with resales of Exchange
Notes for their own accounts, so long as the Prospectus otherwise meets the
requirements of the Securities Act.
In light of the foregoing, if requested by a Participating
Broker-Dealer, the Issuers agree (x) to use their best efforts to keep the
Exchange Registration Statement continuously effective for a period of up to 6
months or such earlier date as each Participating Broker-Dealer shall have
notified the Company in writing that such Participating Broker-Dealer has resold
all Exchange Notes acquired in the Exchange Offer, (y) to comply with the
provisions of Section 5 of this Agreement, as they relate to the Exchange Offer
and the Exchange Registration Statement, and (z) to deliver to such
Participating Broker-Dealer a "cold comfort" letter of the independent public
accountants of the Issuers and a legal opinion as to matters reasonably
requested by such Participating Broker-Dealer relating to the Exchange
Registration Statement and the related Prospectus and any amendments or
supplements thereto.
(f) The Initial Purchasers shall have no liability to any
Participating Broker-Dealer with respect to any request made pursuant to Section
2(e).
(g) Interest on the Exchange Notes and the Private Exchange Notes will
accrue from the last interest payment date on which interest was paid on the
Notes surrendered in exchange
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<PAGE> 12
therefor or, if no interest has been paid on the Notes, from the date of the
original issuance of the Notes.
(h) The Exchange Notes and the Private Exchange Notes may be issued
under (i) the Indenture or (ii) an indenture identical in all material respects
to the Indenture, which in either event shall provide that the Exchange Notes
shall not be subject to the transfer restrictions set forth in the Indenture.
The Indenture or such indenture shall provide that the Exchange Notes, the
Private Exchange Notes and the Notes shall vote and consent together on all
matters as one class and that neither the Exchange Notes, the Private Exchange
Notes nor the Notes will have the right to vote or consent as a separate class
on any matter.
3. SHELF REGISTRATION
(a) If (i) the Company is not permitted to consummate the Exchange
Offer because the Exchange Offer is not permitted by any applicable law or
applicable interpretation of the staff of the SEC or (ii) the Company has not
consummated the Exchange Offer within 150 days of the Issue Date or (iii) any
holder of a Note notifies the Company on or prior to the Exchange Date that (A)
due to a change in law or policy it is not entitled to participate in the
Exchange Offer, (B) due to a change in law or policy it may not resell the
Exchange Notes acquired by it in the Exchange Offer to the public without
delivering a prospectus and the Prospectus contained in the Exchange
Registration Statement is not appropriate or available for such resales by such
holder or (C) it is a broker-dealer that owns Notes (including an Initial
Purchaser that holds Notes as part of an unsold allotment from the original
offering of the Notes) acquired directly from an Issuer or an Affiliate of an
Issuer or (iv) any holder of Private Exchange Notes so requests within 120 days
after the consummation of the Private Exchange (each such event referred to in
clauses (i) through (iv), a "SHELF FILING EVENT"), the Issuers shall cause to be
filed with the SEC pursuant to Rule 415 a shelf registration statement (the
"SHELF REGISTRATION STATEMENT") prior to the later of (x) 120 days after the
Issue Date and (y) 90 days after the occurrence of
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<PAGE> 13
such Shelf Filing Event, relating to all Transfer Restricted Securities (the
"SHELF REGISTRATION") the holders of which have provided the information
required pursuant to Section 3(b) hereof, and shall use their best efforts to
have the Shelf Registration Statement declared effective by the SEC on or prior
to the later of (i) 180 days after the Issue Date and (ii) 90 days after the
occurrence of such Shelf Filing Event. In such circumstances, the Issuers shall
use their best efforts to keep the Shelf Registration Statement continuously
effective under the Securities Act, until (A) 24 months following the date on
which the Shelf Registration Statement was initially declared effective (subject
to extension pursuant to the last paragraph of Section 5 hereof) or (B) if
sooner, the date immediately following the date that all Transfer Restricted
Securities covered by the Shelf Registration Statement have been sold pursuant
thereto (the "EFFECTIVENESS PERIOD"); PROVIDED that the Effectiveness Period
shall be extended to the extent required to permit dealers to comply with the
applicable prospectus delivery requirements of Rule 174 and as otherwise
provided herein.
(b) No holder of Transfer Restricted Securities may include any of its
Transfer Restricted Securities in any Shelf Registration Statement pursuant to
this Agreement unless and until such holder furnishes to the Company in writing,
within 30 days after receipt of a request therefor, such information as the
Company may reasonably request for use in connection with any Shelf Registration
Statement or Prospectus or preliminary prospectus included therein. No holder of
Transfer Restricted Securities shall be entitled to Additional Interest pursuant
to Section 4 hereof unless and until such holder shall have provided all such
reasonably requested information. Each holder of Transfer Restricted Securities
as to which any Shelf Registration Statement is being effected agrees to furnish
promptly to the Company all information required to be disclosed in order to
make the information previously furnished to the Company by such holder not
materially misleading.
4. ADDITIONAL INTEREST
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<PAGE> 14
(a) The parties hereto agree that the holders of Transfer Restricted
Securities will suffer damages if the Issuers fail to fulfill their obligations
pursuant to Section 2 or Section 3, as applicable, and that it would not be
feasible to ascertain the extent of such damages. Accordingly, in the event that
(i) the applicable Registration Statement is not filed with the SEC on or prior
to the date specified herein for such filing, (ii) the applicable Registration
Statement has not been declared effective by the SEC on or prior to the date
specified herein for such effectiveness after such obligation arises, (iii) if
the Exchange Offer is required to be Consummated hereunder, the Company has not
exchanged Exchange Notes for all Notes validly tendered and not validly
withdrawn in accordance with the terms of the Exchange Offer by the Consummation
Date or (iv) the applicable Registration Statement is filed and declared
effective but shall thereafter cease to be effective without being succeeded
immediately by any additional Registration Statement covering the Notes, the
Exchange Notes or the Private Exchange Notes, as the case may be, which has been
filed and declared effective (each such event referred to in clauses (i) through
(iv), a "REGISTRATION DEFAULT"), then the interest rate on Transfer Restricted
Securities will increase ("ADDITIONAL INTEREST"), with respect to the first
90-day period immediately following the occurrence of such Registration Default,
by 0.50% per annum and will increase by an additional 0.50% per annum with
respect to each subsequent 90-day period until such Registration Default has
been cured, up to a maximum amount of 1.50% per annum with respect to all
Registration Defaults. Following the cure of a Registration Default, the accrual
of Additional Interest with respect to such Registration Default will cease and
upon the cure of all Registration Defaults the interest rate will revert to the
original rate.
(b) The Company shall notify the Trustee and paying agent under the
Indenture (or the trustee and paying agent under such other indenture under
which the Transfer Restricted Securities are issued) immediately upon the
happening of each and every Registration Default. The Company shall pay the
Additional Interest due on the Transfer Restricted Securities
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<PAGE> 15
by depositing with the paying agent (which shall not be the Company for these
purposes) for the Transfer Restricted Securities, in trust, for the benefit of
the holders thereof, prior to l1:00 a.m. on the next interest payment date
specified by the Indenture (or such other indenture), sums sufficient to pay the
Additional Interest then due. The Additional Interest due shall be payable on
each interest payment date specified by the Indenture (or such other indenture)
to the record holder entitled to receive the interest payment to be made on such
date. Each obligation to pay Additional Interest shall be deemed to accrue from
and including the applicable Registration Default.
(c) The parties hereto agree that the Additional Interest provided for
in this Section 4 constitutes a reasonable estimate of the damages that will be
suffered by holders of Transfer Restricted Securities by reason of the happening
of any Registration Default.
5. REGISTRATION PROCEDURES
In connection with the Issuers' registration obligations hereunder,
the Issuers shall effect such registrations on the appropriate form available
for the sale of the Notes, the Exchange Notes or Private Exchange Notes, as
applicable, to (i) in the case of the Exchange Offer, permit the exchange of
Exchange Notes for Notes in the Exchange Offer and, if applicable, resales of
Exchange Notes by Participating Broker-Dealers and (ii) in the case of a Shelf
Registration, permit the sale of the applicable Transfer Restricted Securities
in accordance with the method or methods of disposition thereof specified by the
holders of such Transfer Restricted Securities, and pursuant thereto the Issuers
shall as expeditiously as possible:
(a) In the case of a Shelf Registration, a reasonable period of time
prior to the initial filing of a Shelf Registration Statement or Prospectus
and a reasonable period of time prior to the filing of any amendment or
supplement thereto (including any document that would be incorporated or
deemed to be incorporated
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<PAGE> 16
therein by reference), furnish to the holders of the Transfer Restricted
Securities included in such Shelf Registration Statement, their Special
Counsel and the managing underwriters, if any, copies of all such documents
proposed to be filed, which documents (other than those incorporated or
deemed to be incorporated by reference) will be subject to the review of
such holders, their Special Counsel and such underwriters, if any, and
cause the officers and directors of the Issuers, counsel to the Issuers and
independent certified public accountants to the Issuers to respond to such
reasonable inquiries as shall be necessary, in the opinion of respective
counsel to such holders and such underwriters, to conduct a reasonable
investigation within the meaning of the Securities Act; PROVIDED that the
Issuers shall not be deemed to have kept a Shelf Registration Statement
effective during the applicable period if any of them voluntarily takes or
fails to take any reasonable action that results in holders of the Transfer
Restricted Securities covered thereby not being able to sell such Transfer
Restricted Securities pursuant to Federal securities laws during that
period (and the time period during which such Shelf Registration Statement
is required to remain effective hereunder shall be extended by the number
of days during which such holders of Transfer Restricted Securities are not
able to sell such Transfer Restricted Securities). The Issuers shall not
file any such Shelf Registration Statement or related Prospectus or any
amendments or supplements thereto which the holders of a majority of the
Transfer Restricted Securities included in such Shelf Registration
Statement shall reasonably object on a timely basis;
(b) Prepare and file with the SEC such amendments, including
post-effective amendments, to each Registration Statement as may be
necessary to keep such Registration Statement continuously effective for
the applicable time period required hereunder; cause the related Prospectus
to be supplemented by any required Prospectus supplement, and as so
supplemented to be filed pursuant to Rule 424; and
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<PAGE> 17
comply with the provisions of the Securities Act and the Exchange Act with
respect to the disposition of all securities covered by such Registration
Statement during such period in accordance with the intended methods of
disposition by the sellers thereof set forth in such Registration Statement
as so amended or in such Prospectus as so supplemented;
(c) Notify the holders of Transfer Restricted Securities to be sold
or, in the case of an Exchange Offer, tendered for, their Special Counsel
and the managing underwriters, if any, promptly, and (if requested by any
such person), confirm such notice in writing, (i) (A) when a Prospectus or
any Prospectus supplement or post-effective amendment is proposed to be
filed, and (B) with respect to a Registration Statement or any
post-effective amendment, when the same has become effective, (ii) of any
request by the SEC or any other Federal or state governmental authority for
amendments or supplements to a Registration Statement or related Prospectus
or for additional information, (iii) of the issuance by the SEC, any state
securities commission, any other governmental agency or any court of any
stop order, order or injunction suspending or enjoining the use of a
Prospectus or the effectiveness of a Registration Statement or the
initiation of any proceedings for that purpose, (iv) of the receipt by the
Company of any notification with respect to the suspension of the
qualification or exemption from qualification of any of the Notes, Exchange
Notes or Private Exchange Notes for sale in any jurisdiction, or the
initiation or threatening of any proceeding for such purpose, and (v) of
the happening of any event or information becoming known that makes any
statement made in a Registration Statement or related Prospectus or any
document incorporated or deemed to be incorporated therein by reference
untrue in any material respect or that requires the making of any changes
in such Registration Statement, Prospectus or documents so that it will not
contain any untrue statement of a material fact or omit to state any
material fact
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<PAGE> 18
required to be stated therein or necessary to make the statements therein,
not misleading, and that in the case of a Prospectus, it will not contain
any untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading;
(d) Use their best efforts to avoid the issuance of or, if issued,
obtain the withdrawal of any order enjoining or suspending the use of a
Prospectus or the effectiveness of a Registration Statement or the lifting
of any suspension of the qualification (or exemption from qualification) of
any of the Notes, Exchange Notes or Private Exchange Notes for sale in any
jurisdiction, at the earliest practicable moment;
(e) If a Shelf Registration Statement is filed pursuant to Section 3
hereof and if requested by the managing underwriters, if any, or the
holders of a majority in aggregate principal amount of the Transfer
Restricted Securities being sold pursuant to such Shelf Registration
Statement, (i) promptly incorporate in a Prospectus supplement or
post-effective amendment such information as the managing underwriters, if
any, and such holders reasonably believe should be included therein, and
(ii) make all required filings of such Prospectus supplement or such
post-effective amendment under the Securities Act as soon as practicable
after the Company has received notification of the matters to be
incorporated in such Prospectus supplement or post-effective amendment;
PROVIDED, HOWEVER, that the Issuers shall not be required to take any
action pursuant to this Section 5(e) that would, in the opinion of counsel
for the Issuers, violate applicable law;
(f) Upon written request to the Company, furnish to each holder of
Notes, Exchange Notes or Private Exchange Notes to be exchanged or sold
pursuant to a Registration Statement, their Special Counsel and each
managing underwriter, if any, without charge, at least one
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<PAGE> 19
conformed copy of such Registration Statement and each amendment thereto,
including financial statements and schedules, all documents incorporated or
deemed to be incorporated therein by reference, and all exhibits to the
extent requested (including those previously furnished or incorporated by
reference) as soon as practicable after the filing of such documents with
the SEC;
(g) Deliver to each holder of Notes, Exchange Notes or Private
Exchange Notes to be exchanged or sold pursuant to a Registration
Statement, their Special Counsel, and the underwriters, if any, without
charge, as many copies of the Prospectus (including each form of
prospectus) and each amendment or supplement thereto as such persons
reasonably request; and the Issuers hereby consent to the use of such
Prospectus and each amendment or supplement thereto by each of the selling
holders of Transfer Restricted Securities and the underwriters, if any, in
connection with the offering and sale of the Transfer Restricted Securities
covered by such Prospectus and any amendment or supplement thereto;
(h) Prior to any public offering of Notes, Exchange Notes or Private
Exchange Notes, use their best efforts to register or qualify or cooperate
with the holders of Notes, Exchange Notes or Private Exchange Notes to be
sold or tendered for, the underwriters, if any, and their respective
counsel in connection with the registration or qualification (or exemption
from such registration or qualification) of such Notes, Exchange Notes or
Private Exchange Notes for offer and sale under the securities or Blue Sky
laws of such jurisdictions within the United States as any such holder or
underwriter reasonably requests in writing; keep each such registration or
qualification (or exemption therefrom) effective during the period such
Registration Statement is required to be kept effective hereunder and do
any and all other acts or things necessary or advisable to enable the
disposition in such jurisdictions of the Notes, Exchange Notes or Private
Exchange Notes covered by the applicable Registration
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<PAGE> 20
Statement; PROVIDED, HOWEVER, that the Issuers shall not be required to (i)
qualify generally to do business in any jurisdiction where they are not
then so qualified or (ii) take any action which would subject them to
general service of process or to taxation in any jurisdiction where they
are not so subject;
(i) In connection with any sale or transfer of Transfer Restricted
Securities that will result in such securities no longer being Transfer
Restricted Securities, cooperate with the holders thereof and the managing
underwriters, if any, to facilitate the timely preparation and delivery of
certificates representing Transfer Restricted Securities to be sold, which
certificates shall not bear any restrictive legends and shall be in a form
eligible for deposit with The Depository Trust Company and to enable such
Transfer Restricted Securities to be in such denominations and registered
in such names as the managing underwriters, if any, or such holders may
request at least two Business Days prior to any sale of Transfer Restricted
Securities;
(j) Upon the occurrence of any event contemplated by Section 5(c)(v),
as promptly as practicable, prepare a supplement or amendment, including,
if appropriate, a post-effective amendment, to each Registration Statement
or a supplement to the related Prospectus or any document incorporated or
deemed to be incorporated therein by reference, and file any other required
document so that, as thereafter delivered, such Prospectus will not contain
an untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading;
(k) Prior to the effective date of the Exchange Registration
Statement, to provide a CUSIP number for the Exchange Notes (and Private
Exchange Notes, if applicable);
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<PAGE> 21
(l) If a Shelf Registration Statement is filed pursuant to Section 3
hereof, enter into such agreements (including an underwriting agreement in
form, scope and substance as is customary in underwritten offerings) and
take all such other reasonable actions in connection therewith (including
those reasonably requested by the managing underwriters, if any, or the
holders of a majority in aggregate principal amount of the Transfer
Restricted Securities being sold) in order to expedite or facilitate the
disposition of such Transfer Restricted Securities, and, whether or not an
underwriting agreement is entered into and whether or not the registration
is an underwritten registration, (i) make such representations and
warranties to the holders of such Transfer Restricted Securities and the
underwriters, if any, with respect to the business of the Company and its
subsidiaries (including with respect to businesses or assets acquired or to
be acquired by any of them), and the Shelf Registration Statement,
Prospectus and documents, if any, incorporated or deemed to be incorporated
by reference therein, in each case, in form, substance and scope as are
customarily made by issuers to underwriters in underwritten offerings, and
confirm the same if and when requested; (ii) obtain opinions of counsel to
the Issuers and updates thereof (which counsel and opinions (in form, scope
and substance) shall be reasonably satisfactory to the managing
underwriters, if any, and Special Counsel to the holders of the Transfer
Restricted Securities being sold), addressed to each selling holder of
Transfer Restricted Securities and each of the underwriters, if any,
covering the matters customarily covered in opinions requested in
underwritten offerings and such other matters as may be reasonably
requested by such Special Counsel and underwriters; (iii) use their best
efforts to obtain customary "cold comfort" letters and updates thereof from
the independent certified public accountants of the Company (and, if
necessary, any other independent certified public accountants of any
subsidiary of the Company or of any business acquired by the Company for
which financial statements and financial data is, or is
- 20 -
<PAGE> 22
required to be, included in the Shelf Registration Statement), addressed
(where reasonably possible) to each selling holder of Transfer Restricted
Securities and each of the underwriters, if any, such letters to be in
customary form and covering matters of the type customarily covered in
"cold comfort" letters in connection with underwritten offerings; (iv) if
an underwriting agreement is entered into, the same shall contain
indemnification provisions and procedures no less favorable to the selling
holders and the underwriters, if any, than those set forth in Section 7
hereof (or such other provisions and procedures acceptable to holders of a
majority in aggregate principal amount of Transfer Restricted Securities
covered by such Shelf Registration Statement and the managing underwriters,
if any); and (v) deliver such documents and certificates as may be
reasonably requested by the holders of a majority in aggregate principal
amount of the Transfer Restricted Securities being sold, their Special
Counsel and the managing underwriters, if any, to evidence the continued
validity of the representations and warranties made pursuant to clause (i)
above and to evidence compliance with any customary conditions contained in
the underwriting agreement or other agreement entered into by the Issuers;
(m) In the case of a Shelf Registration, make available for inspection
by a representative of the holders of Transfer Restricted Securities being
sold, any underwriter participating in any such disposition of Transfer
Restricted Securities, and any attorney, consultant or accountant retained
by such selling holders or underwriter, at the offices where normally kept,
during reasonable business hours, all financial and other records,
pertinent corporate documents and properties of the Company and its
subsidiaries (including
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<PAGE> 23
with respect to businesses and assets acquired or to be acquired to the
extent that such information is available to the Company), and cause the
officers, directors, agents and employees of the Company and its
subsidiaries (including with respect to businesses and assets acquired or
to be acquired to the extent that such information is available to the
Company) to supply all information in each case reasonably requested by any
such representative, underwriter, attorney, consultant or accountant in
connection with such Shelf Registration; PROVIDED, HOWEVER, that such
persons shall first agree in writing with the Company that any information
that is reasonably and in good faith designated by the Company in writing
as confidential at the time of delivery of such information shall be kept
confidential by such persons, unless (i) disclosure of such information is
required by court or administrative order or is necessary to respond to
inquiries of regulatory authorities, (ii) disclosure of such information is
required by law (including any disclosure requirements pursuant to Federal
securities laws in connection with the filing of the Shelf Registration
Statement or the use of any Prospectus), (iii) such information becomes
generally available to the public other than as a result of a disclosure or
failure to safeguard such information by such person or (iv) such
information becomes available to such person from a source other than the
Company and its subsidiaries and such source is not bound by a
confidentiality agreement; and PROVIDED, FURTHER, that the foregoing
inspection and information gathering shall be coordinated by one counsel
designated by and on behalf of such other persons;
(n) Provide an indenture trustee for the Notes and/or the Exchange
Notes and Private Exchange Notes, as the case may be, and cause an
indenture to be qualified under the TIA not later than the effective date
of the first Registration Statement relating to the Notes and/or the
Exchange Notes and Private Exchange Notes, as the case may be; and if such
indenture shall be the Indenture, in connection therewith, cooperate with
the Trustee and the holders of the Notes and/or the Exchange Notes and
Private Exchange Notes, to effect such changes to the Indenture as may be
required for the Indenture to be so qualified in accordance with the terms
of the TIA; and execute, and use
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<PAGE> 24
its reasonable efforts to cause the Trustee to execute, all customary
documents as may be required to effect such changes, and all other forms
and documents required to be filed with the SEC to enable the Indenture to
be so qualified in a timely manner;
(o) Comply with all applicable rules and regulations of the SEC and
make generally available to their securityholders earning statements
satisfying the provisions of Section 11(a) of the Securities Act and Rule
158, no later than 45 days after the end of any 12-month period (or 90 days
after the end of any 12-month period if such period is a fiscal year) (i)
commencing at the end of any fiscal quarter in which Transfer Restricted
Securities are sold to underwriters in a firm commitment or reasonable
efforts underwritten offering and (ii) if not sold to underwriters in such
an offering, commencing on the first day of the first fiscal quarter after
the effective date of a Registration Statement, which statement shall cover
said period, consistent with the requirements of Rule 158;
(p) Cooperate with each seller of Transfer Restricted Securities
covered by any Registration Statement and each underwriter, if any,
participating in the disposition of such Transfer Restricted Securities and
their respective counsel in connection with any filings required to be made
with the National Association of Securities Dealers, Inc.; and
(q) Use their best efforts to cause the Exchange Notes, if issued, to
be listed on the New York Stock Exchange on or prior to the consummation of
the Exchange Offer.
The Issuers may require a holder of Transfer Restricted Securities to
be included in a Registration Statement to furnish to the Issuers such
information regarding the distribution of such Transfer Restricted Securities as
is required by law to be disclosed in such Registration Statement
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<PAGE> 25
and the Issuers may exclude from such Registration Statement the Transfer
Restricted Securities of any holder who unreasonably fails to furnish such
information within a reasonable time after receiving such request.
If any such Registration Statement refers to any holder by name or
otherwise as the holder of any securities of an Issuer, then such holder shall
have the right to require (i) the insertion therein of language, in form and
substance reasonably satisfactory to such holder, to the effect that the holding
by such holder of such securities is not to be construed as a recommendation by
such holder of the investment quality of the Issuers' securities covered thereby
and that such holding does not imply that such holder will assist in meeting any
future financial requirements of the Issuers, or (ii) in the event that such
reference to such holder by name or otherwise is not required by the Securities
Act, the deletion of the reference to such holder in any amendment or supplement
to the Registration Statement filed or prepared subsequent to the time that such
reference ceases to be required.
In the case of a Shelf Registration pursuant to Section 3 hereof, each
holder of Transfer Restricted Securities agrees by acquisition of such Transfer
Restricted Securities that, upon receipt of any notice from the Company of the
happening of any event of the kind described in Section 5(c)(ii), 5(c)(iii),
5(c)(iv) or 5(c)(v) hereof, such holder will forthwith discontinue disposition
of such Transfer Restricted Securities covered by such Registration Statement or
Prospectus until such holder's receipt of the copies of the supplemented or
amended Prospectus contemplated by Section 5(j) hereof, or until it is advised
in writing (the "ADVICE") by the Company that the use of the applicable
Prospectus may be resumed, and, in either case, has received copies of any
additional or supplemental filings that are incorporated or deemed to be
incorporated by reference in such Prospectus. If the Company shall give any such
notice, the Effectiveness Period shall be extended by the number of days during
such period from and including the date of the giving of such notice to and
including the date when each holder of Transfer Restricted Securities covered by
such Registration Statement
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<PAGE> 26
shall have received (x) the copies of the supplemented or amended Prospectus
contemplated by Section 5(j) hereof or (y) the Advice, and, in either case, has
received copies of any additional or supplemental filings that are incorporated
or deemed to be incorporated by reference in such Prospectus.
6. REGISTRATION EXPENSES
All fees and expenses incident to the performance of or compliance
with this Agreement by the Issuers shall be borne by the Issuers whether or not
any Registration Statement is filed or becomes effective and whether or not any
Notes, Exchange Notes or Private Exchange Notes are issued or sold pursuant to
any Registration Statement. The fees and expenses referred to in the foregoing
sentence shall include, without limitation, (i) all registration and filing fees
(including, without limitation, fees and expenses (A) with respect to filings
required to be made with the National Association of Securities Dealers, Inc.
and (B) in compliance with securities or Blue Sky laws), (ii) printing expenses
(including, without limitation, expenses of printing certificates for Notes,
Exchange Notes and Private Exchange Notes in a form eligible for deposit with
The Depository Trust Company and of printing Prospectuses), (iii) reasonable
fees and disbursements of counsel for the Issuers and the Special Counsel, (iv)
fees and disbursements of all independent certified public accountants referred
to in Section 2(e) and Section 5(l)(iii) hereof (including, without limitation,
the expenses of any special audit and "cold comfort" letters required by or
incident to such performance), (v) if required, the reasonable fees and expenses
of any "qualified independent underwriter" and its counsel, and (vi) fees and
expenses of all other persons retained by the Issuers. In addition, the Issuers
shall pay their internal expenses (including, without limitation, all salaries
and expenses of their respective officers and employees performing legal or
accounting duties), the expense of any annual audit, and the fees and expenses
incurred in connection with the listing of the Notes, Exchange Notes or Private
Exchange Notes to be registered on any securities exchange. Notwithstanding the
foregoing or anything in this
- 25 -
<PAGE> 27
Agreement to the contrary, each holder of Transfer Restricted Securities shall
pay all underwriting discounts and commissions of any underwriters with respect
to any Notes, Exchange Notes or Private Exchange Notes sold by it.
7. INDEMNIFICATION
(a) The Issuers agree, jointly and severally, to indemnify and hold
harmless (i) each Initial Purchaser, each holder of Notes, Exchange Notes and
Private Exchange Notes and each Participating Broker-Dealer, (ii) each person,
if any, who controls (within the meaning of Section 15 of the Securities Act or
Section 20 of the Exchange Act) any of the foregoing (any of the persons
referred to in this clause (ii) being hereinafter referred to as a "controlling
person"), and (iii) the respective officers, directors, partners, employees,
representatives and agents of the Initial Purchasers, each holder of Notes,
Exchange Notes and Private Exchange Notes, each Participating Broker-Dealer and
any controlling person (any person referred to in clause (i), (ii) or (iii) may
hereinafter be referred to as an "INDEMNIFIED PERSON"), from and against any and
all losses, claims, damages, liabilities and judgments arising out of or
relating to any untrue statement or alleged untrue statement of a material fact
contained in any Registration Statement, Prospectus or preliminary prospectus or
in any amendment or supplement thereto, or arising out of or relating to any
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein (in the case of any
Prospectus or preliminary prospectus or supplement thereto, in light of the
circumstances under which they were made) not misleading, except insofar as such
losses, claims, damages, liabilities or judgments are caused by any such untrue
statement or omission or alleged untrue statement or omission based upon
information relating to any Indemnified Person furnished in writing to the
Issuers by or on behalf of such Indemnified Person expressly for use therein;
PROVIDED that the foregoing indemnity with respect to any preliminary prospectus
shall not inure to the benefit of any Indemnified Person from whom the person
asserting such losses, claims,
- 26 -
<PAGE> 28
damages, liabilities and judgments purchased securities if such untrue statement
or omission or alleged untrue statement or omission made in such preliminary
prospectus is eliminated or remedied in the Prospectus and a copy of the
Prospectus shall not have been furnished to such person in a timely manner due
to the wrongful action or wrongful inaction of such Indemnified Person.
(b) In case any action shall be brought against any Indemnified
Person, based upon any Registration Statement or any such Prospectus or
preliminary prospectus or any amendment or supplement thereto and with respect
to which indemnity may be sought against the Issuers hereunder, such Indemnified
Person shall promptly notify the Issuers in writing and the Company shall assume
the defense thereof, including the employment of counsel reasonably satisfactory
to such Indemnified Person and payment of all fees and expenses. Any Indemnified
Person shall have the right to employ separate counsel in any such action and
participate in the defense thereof, but the fees and expenses of such counsel
shall be at the expense of such Indemnified Person, unless (i) the employment of
such counsel shall have been specifically authorized in writing by the Issuers,
(ii) the Company shall have failed to assume the defense and employ counsel or
pay all such fees and expenses or (iii) the named parties to any such action
(including any impleaded parties) include both such Indemnified Person and an
Issuer and such Indemnified Person shall have been advised by counsel that there
may be one or more legal defenses available to it which are different from or
additional to those available to any such Issuer (in which case the Company
shall not have the right to assume the defense of such action on behalf of such
Indemnified Person, it being understood, however, that the Issuers shall not, in
connection with any one such action or separate but substantially similar or
related actions in the same jurisdiction arising out of the same general
allegations or circumstances, be liable for the reasonable fees and expenses of
more than one separate firm of attorneys (in addition to any local counsel) for
all such Indemnified Persons, which firm shall be designated in writing by such
Indemnified Persons, and that all such reasonable fees
- 27 -
<PAGE> 29
and expenses shall be reimbursed as they are incurred). The Issuers shall not be
liable for any settlement of any such action effected without their written
consent but if settled with the written consent of the Issuers, the Issuers
agree, jointly and severally, to indemnify and hold harmless each Indemnified
Person from and against any loss or liability by reason of such settlement. No
Issuer shall, without the prior written consent of each Indemnified Person,
effect any settlement of any pending or threatened proceeding in respect of
which any Indemnified Person is a party and indemnity could have been sought
hereunder by such Indemnified Person, unless such settlement includes an
unconditional release of such Indemnified Person from all liability on claims
that are the subject matter of such proceeding.
(c) In connection with any Registration Statement pursuant to which a
holder of Transfer Restricted Securities offers or sells Transfer Restricted
Securities, such holder agrees, severally and not jointly, to indemnify and hold
harmless the Issuers, their respective directors and officers and any person
controlling an Issuer within the meaning of Section 15 of the Securities Act or
Section 20 of the Exchange Act, to the same extent as the foregoing indemnity
from the Issuers to each Indemnified Person but only with respect to information
relating to such holder furnished in writing by or on behalf of such holder
expressly for use in such Registration Statement. In any such case in which any
action shall be brought against an Issuer, any director or officer of an Issuer
or any person controlling an Issuer based on such Registration Statement and in
respect of which indemnity may be sought against a holder of Transfer Restricted
Securities, such holder shall have the rights and duties given to the Issuers
(except that if an Issuer shall have assumed the defense thereof, such holder
shall not be required to do so, but may employ separate counsel therein and
participate in the defense thereof but the fees and expenses of such counsel
shall be at the expense of such holder), and the Issuers, their respective
directors and officers and any person controlling an Issuer shall have the
rights and duties given to the Indemnified Persons by Section 7(b) hereof.
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<PAGE> 30
(d) If the indemnification provided for in this Section 7 is
unavailable to an indemnified party in respect of any losses, claims, damages,
liabilities or judgments referred to herein, then each indemnifying party, in
lieu of indemnifying such indemnified party, shall contribute to the amount paid
or payable by such indemnified party as a result of such losses, claims,
damages, liabilities and judgments (i) in such proportion as is appropriate to
reflect the relative benefits received by each indemnifying party on the one
hand and the indemnified party on the other hand from the offering of the Notes,
the Exchange Notes or the Private Exchange Notes, as the case may be (it being
expressly understood and agreed that the relative benefits received by the
Issuers from the offering of the Notes, Exchange Notes or Private Exchange
Notes, as the case may be, shall be the amount of the net proceeds received by
the Company from the sale of the Notes to the Initial Purchasers), or (ii) if
the allocation provided by clause (i) above is not permitted by applicable law,
in such proportion as is appropriate to reflect not only the relative benefits
referred to in clause (i) above but also the relative fault of each indemnifying
party on the one hand and the indemnified party on the other hand in connection
with the statements or omissions which resulted in such losses, claims, damages,
liabilities or judgments, as well as any other relevant equitable
considerations. The relative fault of each indemnifying party on the one hand
and the indemnified party on the other hand shall be determined by reference to,
among other things, whether the untrue or alleged untrue statement of a material
fact or the omission to state a material fact relates to information supplied by
an indemnifying party or such indemnified party and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such statement or omission.
The Issuers and the Initial Purchasers agree that it would not be just
and equitable if contribution pursuant to this Section 7(d) were determined by
PRO RATA allocation (even if the Indemnified Person were treated as one entity
for such purpose) or by any other method of allocation which does not take
account of the equitable considerations referred to in the
- 29 -
<PAGE> 31
immediately preceding paragraph. The amount paid or payable by an indemnified
party as a result of the losses, claims, damages, liabilities or judgments
referred to in the immediately preceding paragraph shall be deemed to include,
subject to the limitations set forth above, any legal or other expenses
reasonably incurred by such indemnified party in connection with investigating
or defending any such action or claim. Notwithstanding the provisions of this
Section 7, no Indemnified Person shall be required to contribute any amount in
excess of the amount by which the net profits received by it in connection with
the sale of the Notes, Exchange Notes or Private Exchange Notes contemplated by
this Agreement exceeds the amount of any damages which such Indemnified Person
has otherwise been required to pay by reason of such untrue or alleged untrue
statement or omission or alleged omission. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. The Indemnified Person's obligations to contribute
pursuant to this Section 7(d) are several in proportion to the respective amount
of Notes, Exchange Notes or Private Exchange Notes included in any such
Registration Statement by each Indemnified Person and not joint.
8. RULES 144 AND 144A
Each of Issuers shall use its best efforts to file the reports
required to be filed by it under the Securities Act and the Exchange Act in a
timely manner and, if at any time it is not required to file such reports but in
the past had been required to or did file such reports, it will, upon the
request of any holder of Transfer Restricted Securities, make available other
information as required by, and so long as necessary to permit, sales of its
Transfer Restricted Securities pursuant to Rule 144A. Notwithstanding the
foregoing, nothing in this Section 8 shall be deemed to require an Issuer to
register any of its securities pursuant to the Exchange Act.
9. UNDERWRITTEN REGISTRATIONS
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<PAGE> 32
If any of the Transfer Restricted Securities covered by any Shelf
Registration are to be sold in an underwritten offering, the investment banker
or investment bankers and manager or managers that will administer the offering
will be selected by the holders of a majority in aggregate principal amount of
such Transfer Restricted Securities included in such offering, subject to the
consent of the Company (which will not be unreasonably withheld or delayed).
No person may participate in any underwritten registration hereunder
unless such person (i) agrees to sell such Transfer Restricted Securities on the
basis reasonably provided in any underwriting arrangements approved by the
persons entitled hereunder to approve such arrangements and (ii) completes and
executes all questionnaires, powers of attorney, indemnities, underwriting
agreements and other documents required under the terms of such underwriting
arrangements.
10. MISCELLANEOUS
(a) REMEDIES. In the event of a breach by an Issuer or by a holder of
Notes, Exchange Notes or Private Exchange Notes of any of its obligations under
this Agreement, each holder of Notes, Exchange Notes or Private Exchange Notes
and each Issuer, in addition to being entitled to exercise all rights granted by
law, including recovery of damages, will be entitled to specific performance of
its rights under this Agreement. Subject to Section 4 hereof, the Issuers and
each holder of Notes, Exchange Notes and Private Exchange Notes agree that
monetary damages would not be adequate compensation for any loss incurred by
reason of a breach of any of the provisions of this Agreement and each hereby
further agrees that, in the event of any action for specific performance in
respect of such breach, it shall waive the defense that a remedy at law would be
adequate.
(b) NO INCONSISTENT AGREEMENTS. The Issuers will not enter into any
agreement with respect to their securities that is inconsistent with the rights
granted to the holders of Notes, Exchange Notes and Private Exchange Notes and
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<PAGE> 33
Indemnified Persons in this Agreement or otherwise conflicts with the provisions
hereof. Without the written consent of the holders of a majority in aggregate
principal amount of the outstanding Transfer Restricted Securities, the Issuers
shall not grant to any person any rights which conflict with or are inconsistent
with the provisions of this Agreement.
(c) NO PIGGYBACK ON REGISTRATIONS. The Issuers shall not grant to any
of their securityholders (other than the holders of Transfer Restricted
Securities in such capacity) the right to include any of their securities in any
Registration Statement other than Transfer Restricted Securities.
(d) AMENDMENTS AND WAIVERS. The provisions of this Agreement,
including the provisions of this sentence, may not be amended, modified or
supplemented, and waivers or consents to departures from the provisions hereof
may not be given, otherwise than with the prior written consent of the holders
of not less than a majority of the then outstanding aggregate principal amount
of Transfer Restricted Securities; PROVIDED, HOWEVER, that, for the purposes of
this Agreement, Transfer Restricted Securities that are owned, directly or
indirectly, by the Issuers or any of their Affiliates are not deemed
outstanding. Notwithstanding the foregoing, a waiver or consent to depart from
the provisions hereof with respect to a matter that relates exclusively to the
rights of holders of Transfer Restricted Securities whose securities are being
sold pursuant to a Registration Statement and that does not directly or
indirectly affect the rights of other holders of Transfer Restricted Securities
may be given by holders of a majority in aggregate principal amount of the
Transfer Restricted Securities being sold by such holders pursuant to such
Registration Statement; PROVIDED, HOWEVER, that the provisions of this sentence
may not be amended, modified or supplemented except in accordance with the
provisions of the immediately preceding sentence. Notwithstanding the foregoing,
no amendment, modification, supplement, waiver or consent with respect to
Section 7 shall be made or given otherwise than with the prior written consent
of each Indemnified Person affected thereby.
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<PAGE> 34
(e) NOTICES. All notices and other communications provided for herein
shall be made in writing by hand-delivery, next-day air courier, certified
first-class mail, return receipt requested, telex or telecopier:
(i) if to the Issuers, as provided in the Purchase Agreement,
(ii) if to the Initial Purchasers, as provided in the Purchase
Agreement, or
(iii) if to any other person who is then the registered holder of Notes,
Exchange Notes or Private Exchange Notes, to the address of such holder as
it appears in the register therefor of the Company.
Except as otherwise provided in this Agreement, all such
communications shall be deemed to have been duly given: when delivered by hand,
if personally delivered; one business day after being timely delivered to a
next-day air courier; five business days after being deposited in the mail,
postage prepaid, if mailed; when answered back, if telexed; and when receipt is
acknowledged by the recipient's telecopier machine, if telecopied.
(f) SUCCESSORS AND ASSIGNS. This Agreement shall inure to the benefit
of and be binding upon the successors and permitted assigns of each of the
parties and shall inure to the benefit of each holder of Notes, Exchange Notes
and Private Exchange Notes. The Issuers may not assign any of their rights or
obligations hereunder without the prior written consent of each holder of
Transfer Restricted Securities and each Indemnified Person. Notwithstanding the
foregoing, no successor or assignee of an Issuer shall have any of the rights
granted under this Agreement until such person shall acknowledge its rights and
obligations hereunder by a signed written statement of such person's acceptance
of such rights and obligations.
(g) COUNTERPARTS. This Agreement may be executed in any number of
counterparts and by the parties hereto in
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<PAGE> 35
separate counterparts, each of which when so executed shall be deemed to be an
original and, all of which taken together shall constitute one and the same
Agreement.
(h) GOVERNING LAW; SUBMISSION TO JURISDICTION. THIS AGREEMENT SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK,
AS APPLIED TO CONTRACTS MADE AND PERFORMED WITHIN THE STATE OF NEW YORK. THE
ISSUERS HEREBY IRREVOCABLY SUBMIT TO THE JURISDICTION OF ANY NEW YORK STATE
COURT SITTING IN THE BOROUGH OF MANHATTAN IN THE CITY OF NEW YORK OR ANY FEDERAL
COURT SITTING IN THE BOROUGH OF MANHATTAN IN THE CITY OF NEW YORK IN RESPECT OF
ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT, AND
EACH IRREVOCABLY ACCEPTS FOR ITSELF AND IN RESPECT OF ITS PROPERTY, GENERALLY
AND UNCONDITIONALLY, JURISDICTION OF THE AFORESAID COURTS.
(i) SEVERABILITY. The remedies provided herein are cumulative and not
exclusive of any remedies provided by law. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction to be
invalid, illegal, void or unenforceable, the remainder of the terms, provisions,
covenants and restrictions set forth herein shall remain in full force and
effect and shall in no way be affected, impaired or invalidated, and the parties
hereto shall use their reasonable efforts to find and employ an alternative
means to achieve the same or substantially the same result as that contemplated
by such term, provision, covenant or restriction. It is hereby stipulated and
declared to be the intention of the parties that they would have executed the
remaining terms, provisions, covenants and restrictions without including any of
such that may be hereafter declared invalid, illegal, void or unenforceable.
(j) HEADINGS. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof. All
references made in this Agreement to "Section" and "paragraph" refer to such
Section or paragraph of this Agreement, unless expressly stated otherwise.
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<PAGE> 36
S-1
IN WITNESS WHEREOF, the parties have caused this Registration Rights
Agreement to be duly executed as of the date first written above.
SIMONDS INDUSTRIES INC.
By:
----------------------------------------
Name:
Title:
ARMSTRONG MANUFACTURING COMPANY
By:
----------------------------------------
Name:
Title:
SIMONDS HOLDING COMPANY, INC.
By:
----------------------------------------
Name:
Title:
SIMONDS INDUSTRIES FSC, INC.
By:
----------------------------------------
Name:
Title:
<PAGE> 37
S-2
The foregoing Agreement is hereby confirmed and accepted as of the date first
above written.
SALOMON BROTHERS INC
FIRST UNION CAPITAL MARKETS,
a division of Wheat First
Securities, Inc.
SCHRODER & CO. INC.
By: SALOMON BROTHERS INC
By:
-------------------------
Name:
Title:
<PAGE> 1
EXHIBIT 4.3
CREDIT AGREEMENT
Dated as of July 2, 1998
among
SIMONDS INDUSTRIES INC.
as Borrower,
AND
CERTAIN SUBSIDIARIES OF THE BORROWER
FROM TIME TO TIME PARTY HERETO,
as Guarantors,
THE SEVERAL LENDERS
FROM TIME TO TIME PARTY HERETO
AND
FIRST UNION NATIONAL BANK,
as Agent
<PAGE> 2
TABLE OF CONTENTS
SECTION 1 DEFINITIONS....................................................1
1.1 Definitions.....................................................1
1.2 Computation of Time Periods....................................22
1.3 Accounting Terms...............................................23
SECTION 2 CREDIT FACILITIES.............................................23
2.1 Revolving Loans................................................23
2.2 Letter of Credit Subfacility...................................25
SECTION 3 OTHER PROVISIONS RELATING TO CREDIT FACILITIES................30
3.1 Default Rate...................................................30
3.2 Extension and Conversion.......................................30
3.3 Prepayments....................................................31
3.4 Termination and Reduction of Revolving Committed Amount........32
3.5 Fees...........................................................32
3.6 Capital Adequacy...............................................33
3.7 Limitation on Eurodollar Loans.................................34
3.8 Illegality.....................................................34
3.9 Requirements of Law............................................34
3.10 Treatment of Affected Loans...................................35
3.11 Taxes.........................................................36
3.12 Compensation..................................................38
3.13 Pro Rata Treatment............................................38
3.14 Sharing of Payments...........................................39
3.15 Payments, Computations, Etc...................................40
3.16 Evidence of Debt..............................................42
3.17 Assignment of Commitment Under Certain Circumstances..........42
SECTION 4 GUARANTY......................................................43
4.1 The Guaranty...................................................43
4.2 Obligations Unconditional......................................43
4.3 Reinstatement..................................................44
4.4 Certain Additional Waivers.....................................45
4.5 Remedies.......................................................45
4.6 Rights of Contribution.........................................45
4.7 Continuing Guarantee...........................................46
SECTION 5 CONDITIONS....................................................46
5.1 Closing Conditions.............................................46
5.2 Conditions to all Extensions of Credit.........................52
SECTION 6 REPRESENTATIONS AND WARRANTIES................................53
6.1 Financial Condition............................................53
6.2 No Material Change.............................................54
6.3 Organization and Good Standing.................................54
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<PAGE> 3
6.4 Power; Authorization; Enforceable Obligations..................54
6.5 No Conflicts...................................................54
6.6 No Default.....................................................55
6.7 Ownership......................................................55
6.8 Indebtedness...................................................55
6.9 Litigation.....................................................55
6.10 Taxes.........................................................55
6.11 Compliance with Law...........................................56
6.12 ERISA.........................................................56
6.13 Subsidiaries..................................................57
6.14 Governmental Regulations, Etc.................................57
6.15 Purpose of Loans and Letters of Credit........................58
6.16 Environmental Matters.........................................58
6.17 Intellectual Property.........................................59
6.18 Solvency......................................................60
6.19 Investments...................................................60
6.20 Location of Collateral........................................60
6.21 Disclosure....................................................60
6.22 No Burdensome Restrictions....................................60
6.23 Brokers' Fees.................................................61
6.24 Labor Matters.................................................61
6.25 Nature of Business............................................61
6.26 Year 2000 Compliance..........................................61
SECTION 7 AFFIRMATIVE COVENANTS.........................................61
7.1 Information Covenants..........................................61
7.2 Preservation of Existence and Franchises.......................65
7.3 Books and Records..............................................65
7.4 Compliance with Law............................................65
7.5 Payment of Taxes and Other Indebtedness........................65
7.6 Insurance......................................................66
7.7 Maintenance of Property........................................66
7.8 Performance of Obligations.....................................66
7.9 Use of Proceeds................................................67
7.10 Audits/Inspections............................................67
7.11 Financial Covenants...........................................67
7.12 Additional Credit Parties.....................................68
7.13 Pledged Assets................................................68
7.14 Year 2000 Compliance..........................................69
SECTION 8 NEGATIVE COVENANTS............................................69
8.1 Indebtedness...................................................69
8.2 Liens..........................................................70
8.3 Nature of Business.............................................70
8.4 Consolidation, Merger, Dissolution, etc........................71
8.5 Asset Dispositions.............................................71
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<PAGE> 4
8.6 Investments....................................................72
8.7 Restricted Payments............................................72
8.8 Prepayments of Indebtedness, etc...............................72
8.9 Transactions with Affiliates...................................72
8.10 Fiscal Year; Organizational Documents.........................73
8.11 Limitation on Restricted Actions..............................73
8.12 Ownership of Subsidiaries.....................................73
8.13 Sale Leasebacks...............................................74
SECTION 9 EVENTS OF DEFAULT.............................................74
9.1 Events of Default..............................................74
9.2 Acceleration; Remedies.........................................76
SECTION 10 AGENCY PROVISIONS............................................77
10.1 Appointment, Powers and Immunities............................77
10.2 Reliance by Agent.............................................78
10.3 Defaults......................................................78
10.4 Rights as a Lender............................................78
10.5 Indemnification...............................................79
10.6 Non-Reliance on Agent and Other Lenders.......................79
10.7 Successor Agent...............................................79
SECTION 11 MISCELLANEOUS................................................80
11.1 Notices.......................................................80
11.2 Right of Set-Off; Adjustments.................................81
11.3 Benefit of Agreement..........................................81
11.4 No Waiver; Remedies Cumulative................................83
11.5 Expenses; Indemnification.....................................83
11.6 Amendments, Waivers and Consents..............................84
11.7 Counterparts..................................................85
11.8 Headings......................................................86
11.9 Survival......................................................86
11.10 Governing Law; Submission to Jurisdiction; Venue.............86
11.11 Severability.................................................87
11.12 Entirety.....................................................87
11.13 Binding Effect; Termination..................................87
11.14 Source of Funds..............................................87
11.15 Conflict.....................................................88
-iii-
<PAGE> 5
EXHIBITS
Exhibit 1.1A Form of Pledge Agreement
Exhibit 1.1B Form of Security Agreement
Exhibit 2.1(b)(i) Form of Notice of Borrowing
Exhibit 2.1(b)(iii) Form of Notice of Account Designation
Exhibit 2.1(e) Form of Revolving Note
Exhibit 3.2 Form of Notice of Extension/Conversion
Exhibit 3.3(a) Form of Notice of Prepayment
Exhibit 5.1(d) Form of Legal Opinion
Exhibit 7.1(d) Form of Officer's Compliance Certificate
Exhibit 7.12 Form of Joinder Agreement
Exhibit 11.3(b) Form of Assignment and Acceptance
SCHEDULES
Schedule 1.1A Investments
Schedule 1.1B Liens
Schedule 2.1(a) Lenders
Schedule 6.4 Required Consents, Authorizations, Notices and Filings
Schedule 6.9 Litigation
Schedule 6.12 ERISA
Schedule 6.13 Subsidiaries
Schedule 6.16 Environmental Disclosures
Schedule 6.17 Intellectual Property
Schedule 6.20(a) Mortgaged Properties
Schedule 6.20(b) Collateral Locations
Schedule 6.20(c) Chief Executive Offices/Principal Places of Business
Schedule 7.6 Insurance
Schedule 8.1 Indebtedness
-iv-
<PAGE> 6
CREDIT AGREEMENT
THIS CREDIT AGREEMENT, dated as of July 2, 1998 (as amended, modified,
restated or supplemented from time to time, the "CREDIT AGREEMENT"), is by and
among SIMONDS INDUSTRIES INC., a Delaware corporation (the "BORROWER"), the
Guarantors (as defined herein), the Lenders (as defined herein) and FIRST UNION
NATIONAL BANK, as Agent for the Lenders (in such capacity, the "AGENT").
W I T N E S S E T H
WHEREAS, the Borrower has requested that the Lenders provide a $30,000,000
credit facility for the purposes hereinafter set forth; and
WHEREAS, the Lenders have agreed to make the requested credit facility
available to the Borrower on the terms and conditions hereinafter set forth;
NOW, THEREFORE, IN CONSIDERATION of the premises and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
SECTION 1
DEFINITIONS
1.1 DEFINITIONS.
As used in this Credit Agreement, the following terms shall have the
meanings specified below unless the context otherwise requires:
"ACQUIRED COMPANY EBITDA" means with respect to any Person acquired
in connection with a Permitted Acquisition, for any period, the sum of (i)
net income (excluding extraordinary items) of such Person and its
Subsidiaries on a consolidated basis PLUS (ii) an amount which in the
determination of such net income has been deducted for (A) interest
expense of such Person and its Subsidiaries on a consolidated basis, (B)
total federal, state, local and foreign income, value added and similar
taxes and (C) depreciation, amortization and other non-cash charges for
such period, all as determined in accordance with GAAP.
"ACQUISITION" means the acquisition by any Person of the Capital
Stock or all or substantially all of the Property of another Person,
whether or not involving a merger or consolidation with such Person.
"ADDITIONAL CREDIT PARTY" means each Person that becomes a Guarantor
after the Closing Date by execution of a Joinder Agreement.
"ADJUSTED BASE RATE" means the Base Rate PLUS the Applicable Margin.
"ADJUSTED EURODOLLAR RATE" means the Eurodollar Rate PLUS the
Applicable Margin.
<PAGE> 7
"AFFILIATE" means, with respect to any Person, any other Person (a)
directly or indirectly controlling or controlled by or under direct or
indirect common control with such Person or (b) directly or indirectly
owning or holding ten percent (10%) or more of the equity interest in such
Person. For purposes of this definition, "control" when used with respect
to any Person means the power to direct the management and policies of
such Person, directly or indirectly, whether through the ownership of
voting securities, by contract or otherwise; and the terms "controlling"
and "controlled" have meanings correlative to the foregoing.
"AGENT" shall have the meaning assigned to such term in the heading
hereof, together with any successors or assigns.
"AGENT'S FEE LETTER" means that certain letter agreement, dated as
of June 16, 1998, between the Agent and the Borrower, as amended,
modified, restated or supplemented from time to time.
"AGENT'S FEES" shall have the meaning assigned to such term in
Section 3.5(c).
"APPLICABLE LENDING OFFICE" means, for each Lender, the office of
such Lender (or of an Affiliate of such Lender) as such Lender may from
time to time specify to the Agent and the Borrower by written notice as
the office by which its Eurodollar Loans are made and maintained.
"APPLICABLE MARGIN" means, for purposes of calculating the
applicable interest rate for any day for any Revolving Loan, the
applicable rate of the Commitment Fee for any day for purposes of Section
3.5(a) and the applicable rate of the Standby Letter of Credit Fee for any
day for purposes of Section 3.5(b)(i), the appropriate Applicable Margin
corresponding to the Leverage Ratio in effect as of the most recent
Calculation Date:
<TABLE>
<CAPTION>
====================================================================================================
APPLICABLE
APPLICABLE APPLICABLE MARGINEFOR APPLICABLE
MARGIN FOR MARGIN FOR STANDBY MARGIN FOR
PRICING LEVERAGE EURODOLLAR BASE RATE LETTER OF COMMITMENT
LEVEL RATIO LOANS LOANS CREDIT FEE FEES
----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
I (greater than or equal sign) 2.25% 1.00% 2.25% .50%
5.0 to 1.0
----------------------------------------------------------------------------------------------------
II (less than sign) 5.0 to 1.0 2.00% .875% 2.00% .50%
but (greater than or equal
sign) 4.5 to 1.0
----------------------------------------------------------------------------------------------------
III (less than sign) 4.5 to 1.0 1.75% .50% 1.75% .375%
but (greater than or equal
sign) 4.0 to 1.0
----------------------------------------------------------------------------------------------------
IV (less than sign) 4.0 to 1.0 1.50% .25% 1.50% .375%
but (greater than or equal
sign) 3.5 to 1.0
====================================================================================================
</TABLE>
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<PAGE> 8
<TABLE>
<CAPTION>
====================================================================================================
APPLICABLE
APPLICABLE APPLICABLE MARGINEFOR APPLICABLE
MARGIN FOR MARGIN FOR STANDBY MARGIN FOR
PRICING LEVERAGE EURODOLLAR BASE RATE LETTER OF COMMITMENT
LEVEL RATIO LOANS LOANS CREDIT FEE FEES
----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
V (less than sign) 3.5 to 1.0 1.25% 0.0% 1.25% .25%
====================================================================================================
</TABLE>
The Applicable Margins shall be determined and adjusted quarterly, on the
date (each a "Calculation Date") as soon as practicable after receipt (but
in any event within 5 Business Days thereafter) of the officer's
certificate to be provided by the Borrower in accordance with the
provisions of Section 7.1(d) for the most recently ended fiscal quarter of
the Consolidated Parties, the first of which to occur on September 30,
1998, PROVIDED, HOWEVER, that (i) the initial Applicable Margins shall be
based on Pricing Level I (as shown above) and shall remain at Pricing
Level I until the Calculation Date immediately following September 30,
1998 and, thereafter, the Pricing Level shall be determined by the
Leverage Ratio as of the last day of the most recently ended fiscal
quarter of the Consolidated Parties preceding the applicable Calculation
Date; PROVIDED FURTHER that if the Borrower fails to provide the officer's
certificate required by Section 7.1(d) on or before the most recent
Calculation Date, the Applicable Margin from such Calculation Date shall
be based on Pricing Level I until such time as an appropriate officer's
certificate is provided whereupon the Pricing Level shall be determined by
the then current Leverage Ratio. Each Applicable Margin shall be effective
from one Calculation Date until the next Calculation Date. Any adjustment
in the Applicable Margins shall be applicable to all existing Loans as
well as any new Loans made or issued.
"ASSET DISPOSITION" means the disposition of any or all of the
assets (including without limitation the Capital Stock of a Subsidiary) of
any Consolidated Party whether by sale, lease, transfer or otherwise. The
term "Asset Disposition" shall not include the (i) sale of inventory in
the ordinary course of business or (ii) the sale or disposition of
worn-out or obsolete assets no longer used or useful in the conduct of
such Person's business or (iii) dispositions of assets for which
Replacement Assets are acquired within 180 days of such disposition
provided that such Replacement Assets are pledged to secure the Credit
Party Obligations as set forth in Section 7.13.
"BANKRUPTCY CODE" means the Bankruptcy Code in Title 11 of the
United States Code, as amended, modified, succeeded or replaced from time
to time.
"BANKRUPTCY EVENT" means, with respect to any Person, the occurrence
of any of the following with respect to such Person: (a) a court or
governmental agency having jurisdiction in the premises shall enter a
decree or order for relief in respect of such Person in an involuntary
case under any applicable bankruptcy, insolvency or other similar law now
or hereafter in effect, or appointing a receiver,
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<PAGE> 9
liquidator, assignee, custodian, trustee, sequestrator (or similar
official) of such Person or for any substantial part of its Property or
ordering the winding up or liquidation of its affairs; or (b) there shall
be commenced against such Person an involuntary case under any applicable
bankruptcy, insolvency or other similar law now or hereafter in effect, or
any case, proceeding or other action for the appointment of a receiver,
liquidator, assignee, custodian, trustee, sequestrator (or similar
official) of such Person or for any substantial part of its Property or
for the winding up or liquidation of its affairs, and such involuntary
case or other case, proceeding or other action shall remain undismissed,
undischarged or unbonded for a period of sixty (60) consecutive days; or
(c) such Person shall commence a voluntary case under any applicable
bankruptcy, insolvency or other similar law now or hereafter in effect, or
consent to the entry of an order for relief in an involuntary case under
any such law, or consent to the appointment or taking possession by a
receiver, liquidator, assignee, custodian, trustee, sequestrator (or
similar official) of such Person or for any substantial part of its
Property or make any general assignment for the benefit of creditors; or
(d) such Person shall be unable to, or shall admit in writing its
inability to, pay its debts generally as they become due.
"BASE RATE" means, for any day, the rate per annum equal to the
higher of (a) the Federal Funds Rate for such day plus one-half of one
percent (.5%) and (b) the Prime Rate for such day. Any change in the Base
Rate due to a change in the Prime Rate or the Federal Funds Rate shall be
effective on the effective date of such change in the Prime Rate or
Federal Funds Rate.
"BASE RATE LOAN" means any Loan bearing interest at a rate
determined by reference to the Base Rate.
"BORROWER" means the Person identified as such in the heading
hereof, together with any permitted successors and assigns.
"BUSINESS DAY" means a day other than a Saturday, Sunday or other
day on which commercial banks in Charlotte, North Carolina or New York,
New York are authorized or required by law to close, EXCEPT THAT, when
used in connection with a Eurodollar Loan, such day shall also be a day on
which dealings between banks are carried on in U.S. dollar deposits in
London, England.
"CALCULATION DATE" has the meaning set forth in the definition of
"Applicable Margin" set forth in this Section 1.1.
"CAPITAL LEASE" means, as applied to any Person, any lease of any
Property (whether real, personal or mixed) by that Person as lessee which,
in accordance with GAAP, is or should be accounted for as a capital lease
on the balance sheet of that Person.
"CAPITAL STOCK" means (a) in the case of a corporation, capital
stock, (b) in the case of an association or business entity, any and all
shares, interests, participations, rights or other equivalents (however
designated) of capital stock, (c) in the case of a partnership,
partnership interests (whether general or limited), (d) in the case of a
limited liability company, membership interests and (e) any other interest
or participation that confers on a Person the right to receive a share of
the profits and losses of, or distributions of assets of, the issuing
Person.
-4-
<PAGE> 10
"CASH EQUIVALENTS" means (a) securities issued or directly and fully
guaranteed or insured by the United States of America or any agency or
instrumentality thereof (provided that the full faith and credit of the
United States of America is pledged in support thereof) having maturities
of not more than twelve months from the date of acquisition, (b) U.S.
dollar denominated time deposits and certificates of deposit of (i) any
Lender, (ii) any domestic commercial bank of recognized standing having
capital and surplus in excess of $500,000,000 or (iii) any bank whose
short-term commercial paper rating from S&P is at least A-1 or the
equivalent thereof or from Moody's is at least P-1 or the equivalent
thereof (any such bank being an "APPROVED BANK"), in each case with
maturities of not more than 270 days from the date of acquisition, (c)
commercial paper and variable or fixed rate notes issued by any Approved
Bank (or by the parent company thereof) or any variable rate notes issued
by, or guaranteed by, any domestic corporation rated A-1 (or the
equivalent thereof) or better by S&P or P-1 (or the equivalent thereof) or
better by Moody's and maturing within six months of the date of
acquisition, (d) repurchase agreements with a bank or trust company
(including any of the Lenders) or recognized securities dealer having
capital and surplus in excess of $500,000,000 for direct obligations
issued by or fully guaranteed by the United States of America in which any
Credit Party shall have a perfected first priority security interest
(subject to no other Liens) and having, on the date of purchase thereof, a
fair market value of at least 100% of the amount of the repurchase
obligations and (e) Investments, classified in accordance with GAAP as
current assets, in money market investment programs registered under the
Investment Company Act of 1940, as amended, which are administered by
reputable financial institutions having capital of at least $500,000,000
and the portfolios of which are limited to Investments of the character
described in the foregoing subdivisions (a) through (d).
"CHANGE OF CONTROL" means the occurrence of one or more of the
following events: (i) any sale, lease, exchange or other transfer (in one
transaction or a series of related transactions) of all or substantially
all of the assets of the Borrower to any Person or group of related
Persons for purposes of Section 13(d) of the Exchange Act (a "Group"),
together with Affiliates thereof; (ii) the approval by the holders of
Capital Stock of the Borrower of any plan or proposal for the liquidation
or dissolution of the Borrower; (iii) any Person or Group (other than the
Permitted Holder(s)) shall become the beneficial owner, directly or
indirectly, of shares representing more than 50% of the aggregate ordinary
voting power represented by the issued and outstanding Capital Stock of
the Borrower or (iv) Fleet Equity Partners VI-B, L.P. and/or any of its
Affiliates shall fail to own in excess of 30% of the aggregate ordinary
voting power represented by the issued and outstanding Capital Stock of
the Borrower.
"CLOSING DATE" means the date hereof.
"CODE" means the Internal Revenue Code of 1986, as amended, and any
successor statute thereto, as interpreted by the rules and regulations
issued thereunder, in each case as in effect from time to time. References
to sections of the Code shall be construed also to refer to any successor
sections.
"COLLATERAL" means a collective reference to the collateral which is
identified in, and at any time will be covered by, the Collateral
Documents.
-5-
<PAGE> 11
"COLLATERAL DOCUMENTS" means a collective reference to the Security
Agreement, the Pledge Agreement, the Mortgage Instruments and such other
documents executed and delivered in connection with the attachment and
perfection of the Agent's security interests and liens arising thereunder,
including without limitation, UCC financing statements and patent and
trademark filings.
"COMMITMENT" means (a) with respect to each Lender, the Revolving
Commitment of such Lender and (b) with respect to the Issuing Lender, the
LOC Commitment.
"COMMITMENT FEE" shall have the meaning assigned to such term in
Section 3.5(a).
"COMMITMENT FEE CALCULATION PERIOD" shall have the meaning assigned
to such term in Section 3.5(a).
"CONSOLIDATED CAPITAL EXPENDITURES" means, for any period, all
capital expenditures of the Consolidated Parties on a consolidated basis
for such period, as determined in accordance with GAAP.
"CONSOLIDATED CASH TAXES" means, for any period, the aggregate of
all taxes of the Consolidated Parties on a consolidated basis for such
period, as determined in accordance with GAAP, to the extent the same are
paid in cash during such period.
"CONSOLIDATED EBITDA" means, for any period, the sum of (a)
Consolidated Net Income for such period, plus (b) an amount which, in the
determination of Consolidated Net Income for such period, has been
deducted for (i) Consolidated Interest Expense, (ii) total accrued
federal, state, local and foreign income, value added and similar taxes,
(iii) depreciation, amortization and any other non-cash charges for such
period, all as determined in accordance with GAAP, and (iv) expenses
incurred in connection with the Related Transactions in an aggregate
amount not to exceed $5,000,000.
"CONSOLIDATED INTEREST EXPENSE" means, for any period, interest
expense (excluding the amortization of debt discount and premium but
including the interest component under Capital Leases) of the Consolidated
Parties on a consolidated basis for such period, and as determined in
accordance with GAAP. For purposes hereof, Consolidated Interest Expense
of the Consolidated Parties for the first three complete fiscal quarters
to occur after the Closing Date shall be determined by annualizing the
components thereof such that Consolidated Interest Expense for the first
complete fiscal quarter to occur after the Closing Date would be
multiplied by four (4), the first two (2) complete fiscal quarters would
be multiplied by two (2) and the first three (3) complete fiscal quarters
would be multiplied by one and one-third (1 1/3).
"CONSOLIDATED NET INCOME" means, for any period, net income
(excluding extraordinary items) after taxes for such period of the
Consolidated Parties on a consolidated basis, as determined in accordance
with GAAP.
"CONSOLIDATED PARTIES" means a collective reference to the Borrower
and its Subsidiaries, and "CONSOLIDATED PARTY" means any one of them.
-6-
<PAGE> 12
"CONTINUE", "CONTINUATION", and "CONTINUED" shall refer to the
continuation pursuant to Section 3.2 hereof of a Eurodollar Loan from one
Interest Period to the next Interest Period.
"CONVERT", "CONVERSION", and "CONVERTED" shall refer to a conversion
pursuant to Section 3.2 or Sections 3.7 through 3.12, inclusive, of a Base
Rate Loan into a Eurodollar Loan.
"CREDIT DOCUMENTS" means a collective reference to this Credit
Agreement, the Notes, the LOC Documents, each Joinder Agreement, the
Agent's Fee Letter, the Collateral Documents and all other related
agreements and documents issued or delivered hereunder or thereunder or
pursuant hereto or thereto (in each case as the same may be amended,
modified, restated, supplemented, extended, renewed or replaced from time
to time), and "CREDIT DOCUMENT" means any one of them.
"CREDIT PARTIES" means a collective reference to the Borrower and
the Guarantors, and "CREDIT PARTY" means any one of them.
"CREDIT PARTY OBLIGATIONS" means, without duplication, (a) all of
the obligations of the Credit Parties to the Lenders (including the
Issuing Lender) and the Agent, whenever arising, under this Credit
Agreement, the Notes, the Collateral Documents or any of the other Credit
Documents (including, but not limited to, any interest accruing after the
occurrence of a Bankruptcy Event with respect to any Credit Party,
regardless of whether such interest is an allowed claim under the
Bankruptcy Code) and (b) all liabilities and obligations, whenever
arising, owing from any Credit Party to any Lender, or any Affiliate of a
Lender, arising under any Hedging Agreement.
"DEFAULT" means any event, act or condition which with notice or
lapse of time, or both, would constitute an Event of Default.
"DEFAULTING LENDER" means, at any time, any Lender that (a) has
failed to make a Loan or purchase a Participation Interest required
pursuant to the terms of this Credit Agreement within one Business Day of
when due, (b) other than as set forth in (a) above, has failed to pay to
the Agent or any Lender an amount owed by such Lender pursuant to the
terms of this Credit Agreement within one Business Day of when due, or (c)
has been deemed insolvent or has become subject to a bankruptcy or
insolvency proceeding or with respect to which (or with respect to any of
assets of which) a receiver, trustee or similar official has been
appointed.
"DOLLARS" and "$" means dollars in lawful currency of the United
States of America.
"DOMESTIC SUBSIDIARY" means, with respect to any Person, any
Subsidiary of such Person which is incorporated or organized under the
laws of any State, possession or territory of the United States or the
District of Columbia.
"ELIGIBLE ASSETS" means another business or any substantial part of
another business or other long term assets, in each case, in, or used or
useful in, the same or a similar line of
-7-
<PAGE> 13
business as the Consolidated Parties were engaged in on the Closing Date
or any reasonable extensions or expansions thereof.
"ELIGIBLE ASSIGNEE" means (a) a Lender; (b) an Affiliate of a
Lender; and (c) any other Person approved by the Agent (such approval not
to be unreasonably withheld) and, unless an Event of Default has occurred
and is continuing at the time any assignment is effected in accordance
with Section 11.3, the Borrower (such approval not to be unreasonably
withheld or delayed by the Borrower and such approval to be deemed given
by the Borrower if no objection is received by the assigning Lender and
the Agent from the Borrower within five Business Days after notice of such
proposed assignment has been provided by the assigning Lender to the
Borrower); PROVIDED, HOWEVER, that neither the Borrower nor an Affiliate
of the Borrower shall qualify as an Eligible Assignee.
"ELIGIBLE DOMESTIC INVENTORY" means, as of any date of determination
and without duplication, the lower of the aggregate book value (based on a
FIFO or a moving average cost valuation, consistently applied) or fair
market value of all raw materials, work in process and finished goods
inventory owned by the Borrower or any of its Domestic Subsidiaries, less
appropriate reserves determined in accordance with GAAP but excluding in
any event (i) inventory which is (a) not subject to a perfected, first
priority Lien in favor for the Agent to secure the Credit Party
Obligations or (b) subject to any other Lien that is not a Permitted Lien,
(ii) inventory which fails to meet standards for sale or use imposed by
governmental agencies, departments or divisions having regulatory
authority over such goods, (iii) inventory which is not useable or salable
at prices approximating their cost in the ordinary course of the business
(including without duplication the amount of any reserves for
obsolescence, unsalability or decline in value), (iv) inventory located
outside of the United States, (v) inventory located at a leased location
with respect to which the Agent shall not have received a landlord's
waiver satisfactory to the Agent, (vi) inventory which is leased or on
consignment and (vii) inventory which fails to meet such other
specifications and requirements as may from time to time be established by
the Agent in its reasonable discretion.
"ELIGIBLE DOMESTIC RECEIVABLES" means, as of any date of
determination and without duplication, the aggregate book value of all
accounts receivable, receivables, and obligations for payment created or
arising from the sale of inventory or the rendering of services in the
ordinary course of business (collectively, the "RECEIVABLES"), owned by or
owing to the Borrower or any of its Domestic Subsidiaries, net of
allowances and reserves for doubtful or uncollectible accounts and sales
adjustments consistent with such Person's internal policies and in any
event in accordance with GAAP, but excluding in any event (i) any
Receivable which is (a) not subject to a perfected, first priority Lien in
favor for the Agent to secure the Credit Party Obligations or (b) subject
to any other Lien that is not a Permitted Lien, (ii) Receivables which are
more than 60 days past due or which are greater than 180 days past the
date of invoice (net of reserves for bad debts in connection with any such
Receivables), (iii) 50% of the book value of any Receivable not otherwise
excluded by clause (ii) above but owing from an account debtor which is
the account debtor on any existing Receivable then excluded by such clause
(ii), unless the exclusion by such clause (ii) is a result of a legitimate
dispute by the account debtor and the amount in dispute is less than
$50,000, (iv) Receivables evidenced by notes, chattel paper or other
instruments, unless such notes, chattel paper or instruments have been
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<PAGE> 14
delivered to and are in the possession of the Agent, (v) Receivables owing
by an account debtor which is not solvent or is subject to any bankruptcy
or insolvency proceeding of any kind, (vi) Receivables which are
contingent or subject to offset, deduction, counterclaim, dispute or other
defense to payment, in each case to the extent of such offset, deduction,
counterclaim, dispute or other defense, (vii) Receivables for which any
direct or indirect Subsidiary or any Affiliate is the account debtor, and
(viii) Receivables which fail to meet such other specifications and
requirements as may from time to time be established by the Agent in its
reasonable discretion.
"ENVIRONMENTAL LAWS" means any and all lawful and applicable
Federal, state, local and foreign statutes, laws, regulations, ordinances,
rules, judgments, orders, decrees, permits, concessions, grants,
franchises, licenses, agreements or other governmental restrictions
relating to the environment or to emissions, discharges, releases or
threatened releases of pollutants, contaminants, chemicals, or industrial,
toxic or hazardous substances or wastes into the environment including,
without limitation, ambient air, surface water, ground water, or land, or
otherwise relating to the manufacture, processing, distribution, use,
treatment, storage, disposal, transport, or handling of pollutants,
contaminants, chemicals, or industrial, toxic or hazardous substances or
wastes.
"ERISA" means the Employee Retirement Income Security Act of 1974,
as amended, and any successor statute thereto, as interpreted by the rules
and regulations thereunder, all as the same may be in effect from time to
time. References to sections of ERISA shall be construed also to refer to
any successor sections.
"ERISA AFFILIATE" means an entity which is under common control with
any Credit Party within the meaning of Section 4001(a)(14) of ERISA, or is
a member of a group which includes the Borrower and which is treated as a
single employer under Sections 414(b) or (c) of the Code.
"ERISA EVENT" means (a) with respect to any Plan, the occurrence of
a Reportable Event or the substantial cessation of operations (within the
meaning of Section 4062(e) of ERISA); (b) the withdrawal by any
Consolidated Party or any ERISA Affiliate from a Multiple Employer Plan
during a plan year in which it was a substantial employer (as such term is
defined in Section 4001(a)(2) of ERISA), or the termination of a Multiple
Employer Plan; (c) the distribution of a notice of intent to terminate or
the actual termination of a Plan pursuant to Section 4041(a)(2) or 4041A
of ERISA; (d) the institution of proceedings to terminate or the actual
termination of a Plan by the PBGC under Section 4042 of ERISA; (e) any
event or condition which might constitute grounds under Section 4042 of
ERISA for the termination of, or the appointment of a trustee to
administer, any Plan; (f) the complete or partial withdrawal of any
Consolidated Party or any ERISA Affiliate from a Multiemployer Plan; (g)
the conditions for imposition of a lien under Section 302(f) of ERISA
exist with respect to any Plan; or (h) the adoption of an amendment to any
Plan requiring the provision of security to such Plan pursuant to Section
307 of ERISA.
"EURODOLLAR LOAN" means any Loan that bears interest at a rate based
upon the Eurodollar Rate.
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<PAGE> 15
"EURODOLLAR RATE" means, for any Eurodollar Loan for any Interest
Period therefor, the rate per annum (rounded upwards, if necessary, to the
nearest 1/100 of 1%) determined by the Agent to be equal to the quotient
obtained by dividing (a) the London Interbank Offered Rate for such
Eurodollar Loan for such Interest Period by (b) 1 minus the Eurodollar
Reserve Requirement for such Eurodollar Loan for such Interest Period.
"EURODOLLAR RESERVE REQUIREMENT" means, at any time, the maximum
rate at which reserves (including, without limitation, any marginal,
special, supplemental, or emergency reserves) are required to be
maintained under regulations issued from time to time by the Board of
Governors of the Federal Reserve System (or any successor) by member banks
of the Federal Reserve System against "Eurocurrency liabilities" (as such
term is used in Regulation D). Without limiting the effect of the
foregoing, the Eurodollar Reserve Requirement shall reflect any other
reserves required to be maintained by such member banks with respect to
(a) any category of liabilities which includes deposits by reference to
which the Adjusted Eurodollar Rate is to be determined, or (b) any
category of extensions of credit or other assets which include Eurodollar
Loans. The Adjusted Eurodollar Rate shall be adjusted automatically on and
as of the effective date of any change in the Eurodollar Reserve
Requirement.
"EVENT OF DEFAULT" means such term as defined in Section 9.1.
"EXCLUDED ASSET DISPOSITION" means any Asset Disposition by any
Consolidated Party to any Credit Party if the Credit Parties shall cause
to be executed and delivered such documents, instruments and certificates
as the Agent may request so as to cause the Credit Parties to be in
compliance with the terms of Section 7.13 after giving effect to such
Asset Disposition.
"FEES" means all fees payable pursuant to Section 3.5.
"FEDERAL FUNDS RATE" means, for any day, the rate per annum (rounded
upwards, if necessary, to the nearest 1/100 of 1%) equal to the weighted
average of the rates on overnight Federal funds transactions with members
of the Federal Reserve System arranged by Federal funds brokers on such
day, as published by the Federal Reserve Bank of New York on the Business
Day next succeeding such day; PROVIDED that (a) if such day is not a
Business Day, the Federal Funds Rate for such day shall be such rate on
such transactions on the next preceding Business Day as so published on
the next succeeding Business Day, and (b) if no such rate is so published
on such next succeeding Business Day, the Federal Funds Rate for such day
shall be the average rate charged to the Agent (in its individual
capacity) on such day on such transactions as determined by the Agent.
"FIRST UNION NATIONAL BANK" means First Union National Bank and its
successors.
"FIXED CHARGE COVERAGE RATIO" means, as of the end of each fiscal
quarter of the Consolidated Parties for the twelve month period ending on
such date, the ratio of (a) Consolidated EBITDA for the applicable period
to (b) the sum of (i) Consolidated Interest Expense for the applicable
period PLUS (ii) Consolidated Capital Expenditures for the applicable
period PLUS (iii) Consolidated Cash Taxes for the applicable period.
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<PAGE> 16
"FOREIGN SUBSIDIARY" means, with respect to any Person, any
Subsidiary of such Person which is not a Domestic Subsidiary of such
Person.
"FUNDED INDEBTEDNESS" means, with respect to any Person, without
duplication, (a) all obligations of such Person for borrowed money, (b)
all obligations of such Person evidenced by bonds, debentures, notes or
similar instruments, or upon which interest payments are customarily made,
(c) all obligations of such Person under conditional sale or other title
retention agreements relating to Property purchased by such Person (other
than customary reservations or retentions of title under agreements with
suppliers entered into in the ordinary course of business), (d) all
obligations of such Person issued or assumed as the deferred purchase
price of Property or services purchased by such Person (other than trade
debt incurred in the ordinary course of business and due within six months
of the incurrence thereof) which would appear as liabilities on a balance
sheet of such Person, (e) all Guaranty Obligations of such Person, (f) the
maximum amount of all standby letters of credit issued or bankers'
acceptances facilities created for the account of such Person and, without
duplication, all drafts drawn thereunder (to the extent unreimbursed), (g)
all preferred Capital Stock issued by such Person and required by the
terms thereof to be redeemed, or for which mandatory sinking fund payments
are due, by a fixed date, (h) Indebtedness in respect of any synthetic
lease, end loaded lease financing, tax retention operating lease,
off-balance sheet loan or similar off-balance sheet financing product to
which such Person is a party, (i) all Indebtedness of another Person of
the type referred to in clauses (a)-(h) above secured by (or for which the
holder of such Funded Indebtedness has an existing right, contingent or
otherwise, to be secured by) any Lien on, or payable out of the proceeds
of production from, Property owned or acquired by such Person, whether or
not the obligations secured thereby have been assumed, (j) all Guaranty
Obligations of such Person with respect to Indebtedness of the type
referred to in clauses (a)-(h) above of another Person and (k)
Indebtedness of the type referred to in clauses (a)-(h) above of any
partnership or unincorporated joint venture in which such Person is
legally obligated or has a reasonable expectation of being liable with
respect thereto.
"GAAP" means generally accepted accounting principles in the United
States applied on a consistent basis and subject to the terms of Section
1.3.
"GOVERNMENTAL AUTHORITY" means any Federal, state, local or foreign
court or governmental agency, authority, instrumentality or regulatory
body.
"GUARANTOR" means each of the Persons identified as a "Guarantor" on
the signature pages hereto and each Additional Credit Party which may
hereafter execute a Joinder Agreement, together with their successors and
permitted assigns, and "GUARANTOR" means any one of them.
"GUARANTY OBLIGATIONS" means, with respect to any Person, without
duplication, any obligations of such Person (other than endorsements in
the ordinary course of business of negotiable instruments for deposit or
collection) guaranteeing or intended to guarantee any Indebtedness of any
other Person in any manner, whether direct or indirect, and including
without limitation any obligation, whether or not contingent, (a) to
purchase any such Indebtedness or any Property constituting security
therefor, (b) to advance or provide funds or
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<PAGE> 17
other support for the payment or purchase of any such Indebtedness or to
maintain working capital, solvency or other balance sheet condition of
such other Person (including without limitation keep well agreements,
maintenance agreements, comfort letters or similar agreements or
arrangements) for the benefit of any holder of Indebtedness of such other
Person, (c) to lease or purchase Property, securities or services
primarily for the purpose of assuring the holder of such Indebtedness, or
(d) to otherwise assure or hold harmless the holder of such Indebtedness
against loss in respect thereof. The amount of any Guaranty Obligation
hereunder shall (subject to any limitations set forth therein) be deemed
to be an amount equal to the outstanding principal amount (or maximum
principal amount, if larger) of the Indebtedness in respect of which such
Guaranty Obligation is made.
"HEDGING AGREEMENTS" means any interest rate protection agreement or
foreign currency exchange agreement between any Consolidated Party and any
Lender, or any Affiliate of a Lender.
"INDEBTEDNESS" of any Person means (a) all obligations of such
Person for borrowed money, (b) all obligations of such Person evidenced by
bonds, debentures, notes or similar instruments, or upon which interest
payments are customarily made, (c) all obligations of such Person under
conditional sale or other title retention agreements relating to Property
purchased by such Person (other than customary reservations or retentions
of title under agreements with suppliers entered into in the ordinary
course of business), (d) all obligations of such Person issued or assumed
as the deferred purchase price of Property or services purchased by such
Person (other than trade debt incurred in the ordinary course of business
and due within six months of the incurrence thereof) which would appear as
liabilities on a balance sheet of such Person, (e) all obligations of such
Person under take-or-pay or similar arrangements or under commodities
agreements, (f) all Indebtedness of others secured by (or for which the
holder of such Indebtedness has an existing right, contingent or
otherwise, to be secured by) any Lien on, or payable out of the proceeds
of production from, Property owned or acquired by such Person, whether or
not the obligations secured thereby have been assumed, (g) all Guaranty
Obligations of such Person, (h) the principal portion of all obligations
of such Person under Capital Leases, (i) all obligations of such Person
under Hedging Agreements, (j) the maximum amount of all standby letters of
credit issued or bankers' acceptances facilities created for the account
of such Person and, without duplication, all drafts drawn thereunder (to
the extent unreimbursed), (k) all preferred Capital Stock issued by such
Person and required by the terms thereof to be redeemed, or for which
mandatory sinking fund payments are due, by a fixed date and (l) the
Indebtedness of any partnership or unincorporated joint venture in which
such Person is a general partner or a joint venturer.
"INTEREST COVERAGE RATIO" means, with respect to the Consolidated
Parties on a consolidated basis for the twelve month period ending on the
last day of any fiscal quarter of the Consolidated Parties, the ratio of
(a) Consolidated EBITDA for such period to (b) Consolidated Interest
Expense for such period.
"INTEREST PAYMENT DATE" means (a) as to Base Rate Loans, the last
day of each calendar quarter of the Borrower and the Maturity Date, and
(b) as to Eurodollar Loans, the last day of each applicable Interest
Period and the Maturity Date and in addition where the applicable
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<PAGE> 18
Interest Period for a Eurodollar Loan is greater than three months, then
also the date three months from the beginning of the Interest Period and
each three months thereafter.
"INTEREST PERIOD" means, as to Eurodollar Loans, a period of one,
two, three or six months' duration, as the Borrower may elect, commencing,
in each case, on the date of the borrowing (including continuations and
conversions thereof); PROVIDED, HOWEVER, (a) if any Interest Period would
end on a day which is not a Business Day, such Interest Period shall be
extended to the next succeeding Business Day (except that where the next
succeeding Business Day falls in the next succeeding calendar month, then
on the next preceding Business Day), (b) no Interest Period shall extend
beyond the Maturity Date and (c) where an Interest Period begins on a day
for which there is no numerically corresponding day in the calendar month
in which the Interest Period is to end, such Interest Period shall end on
the last Business Day of such calendar month.
"INVESTMENT" in any Person means (a) the acquisition (whether for
cash, property, services, assumption of Indebtedness, securities or
otherwise) of assets (excluding goods and inventory used or sold in the
ordinary course of business), shares of Capital Stock, bonds, notes,
debentures, partnership, joint ventures or other ownership interests or
other securities of such other Person or (b) any deposit with, or advance,
loan or other extension of credit to, such Person (other than deposits
made in connection with the purchase of equipment or other assets in the
ordinary course of business) or (c) any other capital contribution to or
investment in such Person, including, without limitation, any Guaranty
Obligations (including any support for a letter of credit issued on behalf
of such Person) incurred for the benefit of such Person, but excluding any
Restricted Payment to such Person.
"ISSUING LENDER" means First Union National Bank.
"ISSUING LENDER FEES" shall have the meaning assigned to such term
in Section 3.5(b)(iii).
"JOINDER AGREEMENT" means a Joinder Agreement substantially in the
form of EXHIBIT 7.12 hereto, executed and delivered by an Additional
Credit Party in accordance with the provisions of Section 7.12.
"LENDER" means any of the Persons identified as a "Lender" on the
signature pages hereto, and any Person which may become a Lender by way of
assignment in accordance with the terms hereof, together with their
successors and permitted assigns.
"LETTER OF CREDIT" means any letter of credit issued by the Issuing
Lender for the account of any Credit Party in accordance with the terms of
Section 2.2.
"LEVERAGE RATIO" means, with respect to the Consolidated Parties on
a consolidated basis for the twelve month period ending on the last day of
any fiscal quarter, the ratio of (a) Funded Indebtedness of the
Consolidated Parties on a consolidated basis on the last day of such
period to (b) Consolidated EBITDA for such period.
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"LIEN" means any mortgage, pledge, hypothecation, assignment,
deposit arrangement, security interest, encumbrance, lien (statutory or
otherwise), preference, priority or charge of any kind (including any
agreement to give any of the foregoing, any conditional sale or other
title retention agreement, any financing or similar statement or notice
filed under the Uniform Commercial Code as adopted and in effect in the
relevant jurisdiction or other similar recording or notice statute, and
any lease in the nature thereof).
"LOAN" or "LOANS" means the Revolving Loans (or a portion of any
Revolving Loan bearing interest at the Adjusted Base Rate or the Adjusted
Eurodollar Rate), individually or collectively, as appropriate.
"LOC COMMITMENT" means the commitment of the Issuing Lender to issue
Letters of Credit in an aggregate face amount at any time outstanding
(together with the amounts of any unreimbursed drawings thereon) of up to
the LOC Committed Amount.
"LOC COMMITTED AMOUNT" shall have the meaning assigned to such term
in Section 2.2.
"LOC DOCUMENTS" means, with respect to any Letter of Credit, such
Letter of Credit, any amendments thereto, any documents delivered in
connection therewith, any application therefor, and any agreements,
instruments, guarantees or other documents (whether general in application
or applicable only to such Letter of Credit) governing or providing for
(a) the rights and obligations of the parties concerned or at risk or (b)
any collateral security for such obligations.
"LOC OBLIGATIONS" means, at any time, the sum of (a) the maximum
amount which is, or at any time thereafter may become, available to be
drawn under Letters of Credit then outstanding, assuming compliance with
all requirements for drawings referred to in such Letters of Credit PLUS
(b) the aggregate amount of all drawings under Letters of Credit honored
by the Issuing Lender but not theretofore reimbursed by the Borrower.
"LONDON INTERBANK OFFERED RATE" shall mean, with respect to any
Eurodollar Loan for the Interest Period applicable thereto, the rate of
interest per annum (rounded upwards, if necessary, to the nearest 1/100 of
1%) appearing on Telerate Page 3750 (or any successor page) as the London
interbank offered rate for deposits in Dollars at approximately 11:00 A.M.
(London time) two Business Days prior to the first day of such Interest
Period for a term comparable to such Interest Period; PROVIDED, HOWEVER,
if more than one rate is specified on Telerate Page 3750, the applicable
rate shall be the arithmetic mean of all such rates. If, for any reason,
such rate is not available, the term "LONDON INTERBANK OFFERED RATE" shall
mean, with respect to any Eurodollar Loan for the Interest Period
applicable thereto, the rate of interest per annum (rounded upwards, if
necessary, to the nearest 1/100 of 1%) appearing on Reuters Screen LIBO
Page as the London interbank offered rate for deposits in Dollars at
approximately 11:00 A.M. (London time) two Business Days prior to the
first day of such Interest Period for a term comparable to such Interest
Period; PROVIDED, HOWEVER, if more than one rate is specified on Reuters
Screen LIBO Page, the applicable rate shall be the arithmetic mean of all
such rates.
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<PAGE> 20
"MATERIAL ADVERSE EFFECT" means a material adverse effect on (a) the
condition (financial or otherwise), operations, business, assets,
liabilities or prospects of any Consolidated Party, (b) the ability of any
Credit Party to perform any material obligation under the Credit Documents
to which it is a party or (c) the material rights and remedies of the
Lenders under the Credit Documents.
"MATERIALS OF ENVIRONMENTAL CONCERN" means any gasoline or petroleum
(including crude oil or any fraction thereof) or petroleum products or any
hazardous or toxic substances, materials or wastes, defined or regulated
as such in or under any Environmental Laws, including, without limitation,
asbestos, polychlorinated biphenyls and urea-formaldehyde insulation.
"MATURITY DATE" means July 2, 2003.
"MAXIMUM BORROWING AMOUNT" means the sum of (i) 85% of Eligible
Domestic Receivables PLUS (ii) 50% of Eligible Domestic Inventory PLUS
(iii) $12,000,000.
"MOODY'S" means Moody's Investors Service, Inc., or any successor or
assignee of the business of such company in the business of rating
securities.
"MORTGAGE INSTRUMENTS" shall have the meaning assigned such term in
Section 5.1(g).
"MORTGAGE POLICIES" shall have the meaning assigned such term in
Section 5.1(g).
"MORTGAGED REAL PROPERTIES" shall have the meaning assigned such
term in Section 5.1(g).
"MULTIEMPLOYER PLAN" means a Plan which is a multiemployer plan as
defined in Sections 3(37) or 4001(a)(3) of ERISA.
"MULTIPLE EMPLOYER PLAN" means a Plan which any Consolidated Party
or any ERISA Affiliate and at least one employer other than the
Consolidated Parties or any ERISA Affiliate are contributing sponsors.
"NET LEVERAGE RATIO" means, with respect to the Consolidated Parties
on a consolidated basis for the twelve month period ending on the last day
of any fiscal quarter, the ratio of (a) the sum of (i) Funded Indebtedness
of the Consolidated Parties on the date of determination on a consolidated
basis MINUS (ii) cash and Cash Equivalents of the Consolidated Parties on
the date of determination on a consolidated basis to (b) Consolidated
EBITDA for such period.
"NOTE" or "NOTES" means the Revolving Notes, individually or
collectively, as appropriate.
"NOTICE OF ACCOUNT DESIGNATION" means a written notice of account
designation in substantially the form of EXHIBIT 2.1(b)(iii).
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<PAGE> 21
"NOTICE OF BORROWING" means a written notice of borrowing in
substantially the form of EXHIBIT 2.1(b)(i), as required by Section
2.1(b)(i).
"NOTICE OF EXTENSION/CONVERSION" means the written notice of
extension or conversion in substantially the form of EXHIBIT 3.2, as
required by Section 3.2.
"NOTICE OF PREPAYMENT" means a written notice of prepayment in
substantially the form of EXHIBIT 3.3(a), as required by Section 3.3(a).
"OPERATING LEASE" means, as applied to any Person, any lease
(including, without limitation, leases which may be terminated by the
lessee at any time) of any Property (whether real, personal or mixed)
which is not a Capital Lease other than any such lease in which that
Person is the lessor.
"OTHER TAXES" means such term as is defined in Section 3.11.
"PARTICIPATION INTEREST" means a purchase by a Lender of a
participation in Letters of Credit or LOC Obligations as provided in
Section 2.2 or in any Loans as provided in Section 3.14.
"PBGC" means the Pension Benefit Guaranty Corporation established
pursuant to Subtitle A of Title IV of ERISA and any successor thereof.
"PERMITTED ACQUISITIONS" means any Acquisition (i) which is in the
same or a similar or a related line of business as the Borrower is engaged
in as of the Closing Date or any reasonable expansions or extensions
thereof, (ii) for which, on an individual basis, the consideration paid
shall not, without the consent of the Required Lenders, exceed $10,000,000
(exclusive of Replacement Assets and Seller Subordinated Notes), and in an
aggregate amount with respect to all such Acquisitions during the term of
this Credit Agreement, for which the consideration paid shall not exceed
$25,000,000 (exclusive of Replacement Assets and Seller Subordinated
Notes), (iii) with respect to which a Pro Forma Compliance Certificate
shall have been provided to the Agent showing that the Borrower is in
compliance, on a Pro Forma Basis, with each of the other financial
covenants set forth in Section 7.11, (iv) which shall not result in a
Default or Event of Default, (v) with respect to which Acquired Company
EBITDA is greater than $0 and (vi) which shall be in compliance with the
provisions of Section 7.12 and Section 7.13.
"PERMITTED HOLDERS" means (i) Fleet Venture Resources, Inc., Fleet
Equity Partners VI-B, L.P., Chisholm Partners III, L.P., Kennedy Plaza
Partners, Ross B. George and Joseph L. Sylvia and (ii) any Person
"controlled" (as defined in the definition of "Affiliate") by one or more
Persons identified in clause (i) of this definition.
"PERMITTED INVESTMENTS" means Investments which are either (a) cash
and Cash Equivalents, (b) accounts receivable created, acquired or made by
any Consolidated Party in the ordinary course of business and payable or
dischargeable in accordance with customary trade terms, (c) Investments
existing as of the Closing Date and set forth in SCHEDULE 1.1A, (d)
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<PAGE> 22
transactions permitted by Section 8.9, (e) advances or loans to directors,
officers, employees, agents, customers or suppliers that do not exceed
$500,000 in the aggregate at any one time outstanding for all of the
Consolidated Parties, (f) Investments in any Credit Party, (g) Investments
in Foreign Subsidiaries (excluding Permitted Acquisitions) in an aggregate
amount not to exceed $10,000,000, (h) Investments in securities of trade
creditors or customers received pursuant to any plan of reorganization or
similar arrangement upon the bankruptcy or insolvency of such trade
creditors or customers, (i) Investments made on or about the Closing Date
in connection with the Related Transactions in an aggregate amount not to
exceed $59,000,000, (j) Investments made pursuant to the Stockholders
Agreement to the extent permitted under Section 8.7, (k) Permitted
Acquisitions (including Investments of the Borrower in a Consolidated
Party which provides funding for Permitted Acquisitions) and (l) other
Investments in an aggregate amount not to exceed $500,000.
"PERMITTED LIENS" means:
(a) Liens in favor of the Agent to secure the Credit Party
Obligations;
(b) Liens (other than Liens created or imposed under ERISA) for
taxes, assessments or governmental charges or levies not yet due or Liens
for taxes being contested in good faith by appropriate proceedings for
which adequate reserves determined in accordance with GAAP have been
established (and as to which the Property subject to any such Lien is not
yet subject to foreclosure, sale or loss on account thereof);
(c) statutory Liens of landlords and Liens of carriers,
warehousemen, mechanics, materialmen and suppliers and other Liens imposed
by law or pursuant to customary reservations or retentions of title
arising in the ordinary course of business, PROVIDED that such Liens
secure only amounts not yet due and payable or, if due and payable, are
unfiled and no other action has been taken to enforce the same or are
being contested in good faith by appropriate proceedings for which
adequate reserves determined in accordance with GAAP have been established
(and as to which the Property subject to any such Lien is not yet subject
to foreclosure, sale or loss on account thereof);
(d) Liens (other than Liens created or imposed under ERISA) incurred
or deposits made by any Consolidated Party in the ordinary course of
business in connection with workers' compensation, unemployment insurance
and other types of social security, or to secure the performance of
tenders, statutory obligations, bids, leases, government contracts,
performance and return-of-money bonds and other similar obligations
(exclusive of obligations for the payment of borrowed money);
(e) Liens in connection with attachments or judgments (including
judgment or appeal bonds) PROVIDED that no Event of Default shall have
occurred hereunder, and PROVIDED FURTHER, that the judgments secured
shall, within 30 days after the entry thereof, have been discharged or
execution thereof stayed pending appeal, or shall have been discharged
within 30 days after the expiration of any such stay;
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<PAGE> 23
(f) easements, rights-of-way, restrictions (including zoning
restrictions), minor defects or irregularities in title and other similar
charges or encumbrances not, in any material respect, impairing the use of
the encumbered Property for its intended purposes;
(g) Liens on Property securing purchase money Indebtedness
(including Capital Leases) to the extent permitted under Section 8.1(c),
PROVIDED that any such Lien attaches to such Property concurrently with or
within 30 days after the acquisition thereof;
(h) any interest of title of a lessor under, and Liens arising from
UCC financing statements (or equivalent filings, registrations or
agreements in foreign jurisdictions) relating to, leases permitted by this
Credit Agreement;
(i) normal and customary rights of setoff upon deposits of cash in
favor of banks or other depository institutions PROVIDED, that no Event of
Default shall have occurred hereunder;
(j) Liens existing as of the Closing Date and set forth on SCHEDULE
1.1B; PROVIDED that (i) no such Lien shall at any time be extended to or
cover any Property other than the Property subject thereto on the Closing
Date and (ii) the principal amount of the Indebtedness secured by such
Liens shall not be extended, renewed, refunded or refinanced; and
(k) Liens on the assets of Foreign Subsidiaries securing
Indebtedness permitted by Section 8.1(g).
"PERSON" means any individual, partnership, joint venture, firm,
corporation, limited liability company, association, trust or other
enterprise (whether or not incorporated) or any Governmental Authority.
"PLAN" means any employee benefit plan (as defined in Section 3(3)
of ERISA) which is covered by ERISA and with respect to which any
Consolidated Party or any ERISA Affiliate is (or, if such plan were
terminated at such time, would under Section 4069 of ERISA be deemed to
be) an "employer" within the meaning of Section 3(5) of ERISA.
"PLEDGE AGREEMENT" means the pledge agreement dated as of the
Closing Date in the form of EXHIBIT 1.1A to be executed in favor of the
Agent by each of the Credit Parties, as amended, modified, restated or
supplemented from time to time.
"PRIME RATE" means the per annum rate of interest established from
time to time by First Union National Bank as its prime rate, which rate
may not be the lowest rate of interest charged by First Union National
Bank to its customers.
"PRINCIPAL OFFICE" means the principal office of First Union
National Bank, presently located at Charlotte, North Carolina.
"PRO FORMA BASIS" means, with respect to any transaction, that such
transaction shall be deemed to have occurred (for purposes of calculating
compliance in respect of such transaction with each of the financial
covenants set forth in Section 7.11 as of the most recent fiscal quarter
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end preceding the date of such transaction with respect to which the Agent
has received the required financial information) as of the first day of
the four fiscal-quarter period ending as of such date of determination. As
used herein, "TRANSACTION" shall mean any merger or consolidation as
referred to in Section 8.4 or any Permitted Acquisition as referred to in
Section 8.4 or Section 8.6. Any Indebtedness incurred by the Borrower or
any of its Subsidiaries in order to consummate such transaction (A) shall
be deemed to have been incurred on the first day of the applicable period
and (B) if such Indebtedness has a floating or formula rate, then the
implied rate of interest for such Indebtedness for the applicable period
for purposes of this definition shall be determined by utilizing the rate
which is or would be in effect with respect to such Indebtedness as at the
relevant date of determination. In connection with any calculation of the
financial covenants set forth in Section 7.11 upon giving effect to a
transaction on a Pro Forma Basis for purposes of Section 8.4 or Section
8.6, (1) any Indebtedness incurred by the Borrower or any of its
Subsidiaries in connection with such transaction shall be deemed to have
been incurred as of the first day of the applicable period and (2) income
statement items (whether positive or negative) attributable to the
Property acquired in such transaction shall be included to the extent
relating to the relevant period.
"PRO FORMA COMPLIANCE CERTIFICATE" means a certificate of the chief
financial officer of the Borrower delivered to the Agent in connection
with any merger or consolidation as referred to in Section 8.4 or any
Permitted Acquisition as referred to in Section 8.4 or Section 8.6 and
containing reasonably detailed calculations, upon giving effect to the
applicable transaction on a Pro Forma Basis, of the financial covenants
contained in Section 7.11 as of the most recent fiscal quarter end
preceding the date of the applicable transaction with respect to which the
Agent shall have received the required financial information.
"PROPERTY" means any interest in any kind of property or asset,
whether real, personal or mixed, or tangible or intangible.
"REGISTER" shall have the meaning given such term in Section
11.3(c).
"REGULATION G, T, U, OR X" means Regulation G, T, U or X,
respectively, of the Board of Governors of the Federal Reserve System as
from time to time in effect and any successor to all or a portion thereof.
"RELATED TRANSACTIONS" shall mean the transactions effected pursuant
to (i) that certain letter agreement dated on or about the date hereof
between the Borrower and Massachusetts Capital Resource Company pursuant
to which the Borrower has agreed to repurchase the Borrower's Warrant
dated May 26, 1995, for 5,051.94 shares of its Capital Stock, (ii) those
certain letter agreements dated on or about the date hereof between the
Borrower and certain of its employees pursuant to which the Borrower has
agreed to repurchase stock options covering a total of 36,704.19 shares of
its Capital Stock, and (iii) those certain letter agreements dated on or
about the date hereof between the Borrower and certain of its stockholders
pursuant to which the Borrower has agreed to repurchase a total of
114,036.31 shares of its Capital Stock.
"RELEASE" means any spilling, leaking, pumping, pouring, emitting,
emptying, discharging, injecting, escaping, leaching, dumping or disposing
into the environment
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(including the abandonment or discarding of barrels, containers and other
closed receptacles containing any Materials of Environmental Concern).
"REPLACEMENT ASSETS" means assets and property which are acquired
with proceeds from the sale or as a result of the exchange of existing
assets and property and which will be used in the business of the
Consolidated Parties as conducted on the Closing Date or in a business the
same, similar or reasonably related thereto (including Capital Stock of a
Person which becomes a Subsidiary of the Borrower if such Person is
engaged in businesses which comply with Section 8.3 hereof).
"REPORTABLE EVENT" means any of the events set forth in Section
4043(c) of ERISA, other than those events as to which the notice
requirement has been waived by regulation.
"REQUIRED LENDERS" means, at any time, Lenders which are not
Defaulting Lenders and holding in the aggregate at least 66 2/3% of (a)
the Revolving Commitments (and Participation Interests therein) or (b) if
the Commitments have been terminated, the outstanding Loans and
Participation Interests (including the Participation Interests of the
Issuing Lender in any Letters of Credit); provided, however, that if only
two Lenders shall have Commitments at any time during the term of this
Credit Agreement, then "Required Lenders" shall mean Lenders which are not
Defaulting Lenders and holding in the aggregate at least 100% of the
Revolving Commitments, or if the Revolving Commitments have been
terminated, the outstanding Loans and Participation Interests.
"REQUIREMENT OF LAW" means, as to any Person, the certificate of
incorporation and by-laws or other organizational or governing documents
of such Person, and any law, treaty, rule or regulation or determination
of an arbitrator or a court or other Governmental Authority, in each case
applicable to or binding upon such Person or any of its material property
is subject.
"RESPONSIBLE OFFICER" means either the president or chief financial
officer of the Borrower.
"RESTRICTED PAYMENT" means (a) any dividend or other distribution,
direct or indirect, on account of any shares of any class of Capital Stock
of any Consolidated Party, now or hereafter outstanding, (b) any
redemption, retirement, sinking fund or similar payment, purchase or other
acquisition for value, direct or indirect, of any shares of any class of
Capital Stock of any Consolidated Party, now or hereafter outstanding and
(c) any payment made to retire, or to obtain the surrender of, any
outstanding warrants, options or other rights to acquire shares of any
class of Capital Stock of any Consolidated Party, now or hereafter
outstanding.
"REVOLVING COMMITMENT" means, with respect to each Lender, the
commitment of such Lender in an aggregate principal amount at any time
outstanding of up to such Lender's Revolving Commitment Percentage of the
Revolving Committed Amount, (a) to make Revolving Loans in accordance with
the provisions of Section 2.1(a) and (b) to purchase Participation
Interests in Letters of Credit in accordance with the provisions of
Section 2.2(c).
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"REVOLVING COMMITMENT PERCENTAGE" means, for any Lender, the
percentage identified as its Revolving Commitment Percentage on SCHEDULE
2.1(a), as such percentage may be modified in connection with any
assignment made in accordance with the provisions of Section 11.3.
"REVOLVING COMMITTED AMOUNT" shall have the meaning assigned to such
term in Section 2.1(a).
"REVOLVING LOANS" shall have the meaning assigned to such term in
Section 2.1(a).
"REVOLVING NOTE" or "REVOLVING NOTES" means the promissory notes of
the Borrower in favor of each of the Lenders evidencing the Revolving
Loans provided pursuant to Section 2.1(e), individually or collectively,
as appropriate, as such promissory notes may be amended, modified,
restated, supplemented, extended, renewed or replaced from time to time.
"S&P" means Standard & Poor's Ratings Group, a division of McGraw
Hill, Inc., or any successor or assignee of the business of such division
in the business of rating securities.
"SALE AND LEASEBACK TRANSACTION" means any direct or indirect
arrangement with any Person or to which any such Person is a party,
providing for the leasing to any Consolidated Party of any Property,
whether owned by such Consolidated Party as of the Closing Date or later
acquired, which has been or is to be sold or transferred by such
Consolidated Party to such Person or to any other Person from whom funds
have been, or are to be, advanced by such Person on the security of such
Property.
"SECURITY AGREEMENT" means the security agreement dated as of the
Closing Date in the form of EXHIBIT 1.1B to be executed in favor of the
Agent by each of the Credit Parties, as amended, modified, restated or
supplemented from time to time.
"SELLER SUBORDINATED NOTES" means any notes issued to a seller in
connection with a Permitted Acquisition provided that such notes are
subordinated to Credit Party Obligations and are otherwise on terms and
conditions reasonably satisfactory to the Agent.
"SINGLE EMPLOYER PLAN" means any Plan which is covered by Title IV
of ERISA, but which is not a Multiemployer Plan or a Multiple Employer
Plan.
"SOLVENT" or "SOLVENCY" means, with respect to any Person as of a
particular date, that on such date (a) such Person is able to realize upon
its assets and pay its debts and other liabilities, contingent obligations
and other commitments as they mature in the normal course of business, (b)
such Person does not intend to, and does not believe that it will, incur
debts or liabilities beyond such Person's ability to pay as such debts and
liabilities mature in their ordinary course, (c) such Person is not
engaged in a business or a transaction, and is not about to engage in a
business or a transaction, for which such Person's Property would
constitute unreasonably small capital after giving due consideration to
the prevailing practice in the industry in which such Person is engaged or
is to engage, (d) the fair value of the Property of such Person is greater
than the total amount of liabilities, including, without limitation,
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<PAGE> 27
contingent liabilities, of such Person and (e) the present fair salable
value of the assets of such Person is not less than the amount that will
be required to pay the probable liability of such Person on its debts as
they become absolute and matured. In computing the amount of contingent
liabilities at any time, it is intended that such liabilities will be
computed at the amount which, in light of all the facts and circumstances
existing at such time, represents the amount that can reasonably be
expected to become an actual or matured liability.
"STANDBY LETTER OF CREDIT FEE" shall have the meaning assigned to
such term in Section 3.5(b)(i).
"STOCKHOLDERS AGREEMENT" means the Stockholder Agreement dated on or
about the date hereof among the Borrower and all of its stockholders.
"SUBORDINATED NOTES" means those certain 10 1/4% senior subordinated
notes of the Borrower in an aggregate principal amount of up to
$150,000,000.
"SUBSIDIARY" means, as to any Person, (a) any corporation more than
50% of whose Capital Stock of any class or classes having by the terms
thereof ordinary voting power to elect a majority of the directors of such
corporation (irrespective of whether or not at the time, any class or
classes of such corporation shall have or might have voting power by
reason of the happening of any contingency) is at the time owned by such
Person directly or indirectly through Subsidiaries, and (b) any
partnership, association, joint venture or other entity in which such
Person directly or indirectly through Subsidiaries has more than 50%
equity interest at any time.
"TAXES" means such term as is defined in Section 3.11.
"TRADE LETTER OF CREDIT FEE" shall have the meaning assigned to such
term in Section 3.5(b)(ii).
"VOTING STOCK" means, with respect to any Person, Capital Stock
issued by such Person the holders of which are ordinarily, in the absence
of contingencies, entitled to vote for the election of directors (or
persons performing similar functions) of such Person, even though the
right so to vote has been suspended by the happening of such a
contingency.
"WHOLLY OWNED SUBSIDIARY" of any Person means any Subsidiary 100% of
whose Voting Stock or other equity interests is at the time owned by such
Person directly or indirectly through other Wholly Owned Subsidiaries.
1.2 COMPUTATION OF TIME PERIODS.
For purposes of computation of periods of time hereunder, the word "from"
means "from and including" and the words "to" and "until" each mean "to but
excluding."
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1.3 ACCOUNTING TERMS.
Except as otherwise expressly provided herein, all accounting terms used
herein shall be interpreted, and all financial statements and certificates and
reports as to financial matters required to be delivered to the Lenders
hereunder shall be prepared, in accordance with GAAP applied on a consistent
basis. All calculations made for the purposes of determining compliance with
this Credit Agreement shall (except as otherwise expressly provided herein) be
made by application of GAAP applied on a basis consistent with the most recent
annual or quarterly financial statements delivered pursuant to Section 7.1 (or,
prior to the delivery of the first financial statements pursuant to Section 7.1,
consistent with the financial statements as at December 27, 1997); provided,
HOWEVER, if (a) the Borrower shall object to determining such compliance on such
basis at the time of delivery of such financial statements due to any change in
GAAP or the rules promulgated with respect thereto or (b) the Agent or the
Required Lenders shall so object in writing within 60 days after delivery of
such financial statements, then such calculations shall be made on a basis
consistent with the most recent financial statements delivered by the Borrower
to the Lenders as to which no such objection shall have been made.
Notwithstanding the above, the parties hereto acknowledge and agree that,
for purposes of all calculations made under the financial covenants set forth in
Section 7.11 (including without limitation for purposes of the definitions of
"Applicable Margin" and "Pro Forma Basis" set forth in Section 1.1), (i) income
statement items (whether positive or negative) attributable to any Person or
Property acquired in any Investment transaction contemplated by Section 8.6
shall be included to the extent relating to any period applicable in such
calculations occurring after the date of such transaction (and, notwithstanding
the foregoing, during the first four fiscal quarters following the date of such
transaction, shall be included on an annualized basis).
SECTION 2
CREDIT FACILITIES
2.1 REVOLVING LOANS.
(a) REVOLVING COMMITMENT. Subject to the terms and conditions hereof
and in reliance upon the representations and warranties set forth herein,
each Lender severally agrees to make available to the Borrower such
Lender's Revolving Commitment Percentage of revolving credit loans
requested by the Borrower in Dollars ("REVOLVING LOANS") from time to time
from the Closing Date until the Maturity Date, or such earlier date as the
Revolving Commitments shall have been terminated as provided herein for
the purposes hereinafter set forth; PROVIDED, HOWEVER, that the sum of the
aggregate principal amount of outstanding Revolving Loans shall not exceed
THIRTY MILLION DOLLARS ($30,000,000) (provided, that until such time as
the Credit Parties shall have caused the liens relating to the assets of
Nothing America, Inc. in favor of Wells Fargo Bank to have been released
in full, the aggregate principal amount of Revolving Loans shall not
exceed $28,500,000) (as such aggregate maximum amount may be reduced from
time to time as provided in Section 3.4 and Section 8.1(g), the "REVOLVING
COMMITTED AMOUNT"); PROVIDED, FURTHER, (A) with regard to each Lender
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individually, such Lender's outstanding Revolving Loans shall not exceed
such Lender's Revolving Commitment Percentage of the Revolving Committed
Amount, and (B) the aggregate principal amount of outstanding Revolving
Loans PLUS LOC Obligations outstanding shall not exceed the Revolving
Committed Amount. Revolving Loans may consist of Base Rate Loans or
Eurodollar Loans, or a combination thereof, as the Borrower may request,
and may be repaid and reborrowed in accordance with the provisions hereof;
PROVIDED, HOWEVER, that no more than 5 Eurodollar Loans shall be
outstanding hereunder at any time. For purposes hereof, Eurodollar Loans
with different Interest Periods shall be considered as separate Eurodollar
Loans, even if they begin on the same date, although borrowings,
extensions and conversions may, in accordance with the provisions hereof,
be combined at the end of existing Interest Periods to constitute a new
Eurodollar Loan with a single Interest Period. Revolving Loans hereunder
may be repaid and reborrowed in accordance with the provisions hereof.
(b) REVOLVING LOAN BORROWINGS.
(i) NOTICE OF BORROWING. The Borrower shall request a
Revolving Loan borrowing by written notice (or telephonic notice
promptly confirmed in writing) to the Agent not later than 11:00
A.M. (Charlotte, North Carolina time) on the Business Day prior to
the date of the requested borrowing in the case of Base Rate Loans,
and on the third Business Day prior to the date of the requested
borrowing in the case of Eurodollar Loans. Each such request for
borrowing shall be irrevocable and shall specify (A) that a
Revolving Loan is requested, (B) the date of the requested borrowing
(which shall be a Business Day), (C) the aggregate principal amount
to be borrowed, and (D) whether the borrowing shall be comprised of
Base Rate Loans, Eurodollar Loans or a combination thereof, and if
Eurodollar Loans are requested, the Interest Period(s) therefor. If
the Borrower shall fail to specify in any such Notice of Borrowing
(I) an applicable Interest Period in the case of a Eurodollar Loan,
then such notice shall be deemed to be a request for an Interest
Period of one month, or (II) the type of Revolving Loan requested,
then such notice shall be deemed to be a request for a Base Rate
Loan hereunder. The Agent shall give notice to each affected Lender
promptly upon receipt of each Notice of Borrowing pursuant to this
Section 2.1(b)(i), the contents thereof and each such Lender's share
of any borrowing to be made pursuant thereto.
(ii) MINIMUM AMOUNTS. Each Eurodollar Loan or Base Rate Loan
that is a Revolving Loan shall be in a minimum aggregate principal
amount of $500,000 and integral multiples of $100,000 in excess
thereof (or the remaining amount of the Revolving Committed Amount,
if less).
(iii) ADVANCES. Each Lender will make its Revolving Commitment
Percentage of each Revolving Loan borrowing available to the Agent
for the account of the Borrower as specified in Section 3.15(a), or
in such other manner as the Agent may specify in writing, by 1:00
P.M. (Charlotte, North Carolina time) on the date specified in the
applicable Notice of Borrowing in Dollars and in funds immediately
available to the Agent. Such borrowing will then be made available
to the Borrower by the Agent by crediting the account of the
Borrower on the books of such office with the aggregate of the
amounts made available to the Agent by the Lenders and in like funds
as received
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by the Agent. The Borrower hereby irrevocably authorizes the Agent
to, and the Agent shall, on such date disburse the proceeds of each
Revolving Loan requested by the Borrower pursuant to this subsection
2.1(b)(iii) in immediately available funds by crediting or wiring
such proceeds to the deposit account of the Borrower identified in
the most recent Notice of Account Designation substantially in the
form of EXHIBIT 2.1(b)(iii) hereto (a "Notice of Account
Designation") delivered by the Borrower to the Agent or as may be
otherwise agreed upon the Borrower and the Agent from time to time.
(c) REPAYMENT. The principal amount of all Revolving Loans shall be
due and payable in full on the Maturity Date, unless accelerated sooner
pursuant to Section 9.2.
(d) INTEREST. Subject to the provisions of Section 3.1,
(i) BASE RATE LOANS. During such periods as Revolving Loans
shall be comprised in whole or in part of Base Rate Loans, such Base
Rate Loans shall bear interest at a per annum rate equal to the
Adjusted Base Rate.
(ii) EURODOLLAR LOANS. During such periods as Revolving Loans
shall be comprised in whole or in part of Eurodollar Loans, such
Eurodollar Loans shall bear interest at a per annum rate equal to
the Adjusted Eurodollar Rate.
Interest on Revolving Loans shall be payable in arrears on each applicable
Interest Payment Date (or at such other times as may be specified herein).
(e) REVOLVING NOTES. The Revolving Loans made by each Lender shall
be evidenced by a duly executed promissory note of the Borrower to such
Lender in an original principal amount equal to such Lender's Revolving
Commitment Percentage of the Revolving Committed Amount and in
substantially the form of EXHIBIT 2.1(e).
2.2 LETTER OF CREDIT SUBFACILITY.
(a) ISSUANCE. Subject to the terms and conditions hereof and of the
LOC Documents, if any, and any other terms and conditions which the
Issuing Lender may reasonably require and in reliance upon the
representations and warranties set forth herein, the Issuing Lender agrees
to issue, and each Lender severally agrees to participate in the issuance
by the Issuing Lender of, standby and trade Letters of Credit in Dollars
from time to time from the Closing Date until the Maturity Date as the
Borrower may request, in a form acceptable to the Issuing Lender;
PROVIDED, HOWEVER, that (i) the LOC Obligations outstanding shall not at
any time exceed THREE MILLION DOLLARS ($3,000,000) (the "LOC COMMITTED
AMOUNT") and (ii) the sum of the aggregate principal amount of outstanding
Revolving Loans PLUS LOC Obligations outstanding shall not at any time
exceed the Revolving Committed Amount. No Letter of Credit shall (x)
unless otherwise agreed by the Agent, have an original expiry date more
than one year from the date of issuance or (y) as originally issued or as
extended, have an expiry date extending beyond the Maturity Date. Each
Letter of Credit shall
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comply with the related LOC Documents. The issuance and expiry dates of
each Letter of Credit shall be a Business Day.
(b) NOTICE AND REPORTS. The request for the issuance of a Letter of
Credit shall be submitted by the Borrower to the Issuing Lender at least
three (3) Business Days prior to the requested date of issuance. The
Issuing Lender will, at least quarterly and more frequently upon request,
disseminate to each of the Lenders a detailed report specifying the
Letters of Credit which are then issued and outstanding and any activity
with respect thereto which may have occurred since the date of the prior
report, and including therein, among other things, the beneficiary, the
face amount and the expiry date, as well as any payment or expirations
which may have occurred.
(c) PARTICIPATION. Each Lender, upon issuance of a Letter of Credit,
shall be deemed to have purchased without recourse a Participation
Interest from the applicable Issuing Lender in such Letter of Credit and
the obligations arising thereunder and any collateral relating thereto, in
each case in an amount equal to its pro rata share of the obligations
under such Letter of Credit (based on the respective Revolving Commitment
Percentages of the Lenders) and shall absolutely, unconditionally and
irrevocably assume and be obligated to pay to the Issuing Lender and
discharge when due, its pro rata share of the obligations arising under
such Letter of Credit. Without limiting the scope and nature of each
Lender's Participation Interest in any Letter of Credit, to the extent
that the Issuing Lender has not been reimbursed as required hereunder or
under any such Letter of Credit, each such Lender shall pay to the Issuing
Lender its pro rata share of such unreimbursed drawing in same day funds
on the day of notification by the Issuing Lender of an unreimbursed
drawing pursuant to the provisions of subsection (d) below. The obligation
of each Lender to so reimburse the Issuing Lender shall be absolute and
unconditional and shall not be affected by the occurrence of a Default, an
Event of Default or any other occurrence or event. Any such reimbursement
shall not relieve or otherwise impair the obligation of the Borrower to
reimburse the Issuing Lender under any Letter of Credit, together with
interest as hereinafter provided.
(d) REIMBURSEMENT. In the event of any drawing under any Letter of
Credit, the Issuing Lender will promptly notify the Borrower. Unless the
Borrower shall immediately notify the Issuing Lender that the Borrower
intends to otherwise reimburse the Issuing Lender for such drawing, the
Borrower shall be deemed to have requested that the Lenders make a
Revolving Loan in the amount of the drawing as provided in subsection (e)
below on the related Letter of Credit, the proceeds of which will be used
to satisfy the related reimbursement obligations. The Borrower promises to
reimburse the Issuing Lender on the day of drawing under any Letter of
Credit (either with the proceeds of a Revolving Loan obtained hereunder or
otherwise) in same day funds. If the Borrower shall fail to reimburse the
Issuing Lender as provided hereinabove, the unreimbursed amount of such
drawing shall bear interest at a per annum rate equal to the Base Rate
PLUS 2%. The Borrower's reimbursement obligations hereunder shall be
absolute and unconditional under all circumstances irrespective of any
rights of setoff, counterclaim or defense to payment the Borrower may
claim or have against the Issuing Lender, the Agent, the Lenders, the
beneficiary of the Letter of Credit drawn upon or any other Person,
including without limitation any defense based on any failure of the
Borrower or any other Credit Party to receive consideration or the
legality, validity, regularity or
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unenforceability of the Letter of Credit. The Issuing Lender will promptly
notify the other Lenders of the amount of any unreimbursed drawing and
each Lender shall promptly pay to the Agent for the account of the Issuing
Lender in Dollars and in immediately available funds, the amount of such
Lender's pro rata share of such unreimbursed drawing. Such payment shall
be made on the day such notice is received by such Lender from the Issuing
Lender if such notice is received at or before 2:00 P.M. (Charlotte, North
Carolina time) otherwise such payment shall be made at or before 12:00
Noon (Charlotte, North Carolina time) on the Business Day next succeeding
the day such notice is received. If such Lender does not pay such amount
to the Issuing Lender in full upon such request, such Lender shall, on
demand, pay to the Agent for the account of the Issuing Lender interest on
the unpaid amount during the period from the date of such drawing until
such Lender pays such amount to the Issuing Lender in full at a rate per
annum equal to, if paid within two (2) Business Days of the date that such
Lender is required to make payments of such amount pursuant to the
preceding sentence, the Federal Funds Rate and thereafter at a rate equal
to the Base Rate. Each Lender's obligation to make such payment to the
Issuing Lender, and the right of the Issuing Lender to receive the same,
shall be absolute and unconditional, shall not be affected by any
circumstance whatsoever and without regard to the termination of this
Credit Agreement or the Commitments hereunder, the existence of a Default
or Event of Default or the acceleration of the obligations of the Borrower
hereunder and shall be made without any offset, abatement, withholding or
reduction whatsoever. Simultaneously with the making of each such payment
by a Lender to the Issuing Lender, such Lender shall, automatically and
without any further action on the part of the Issuing Lender or such
Lender, acquire a Participation Interest in an amount equal to such
payment (excluding the portion of such payment constituting interest owing
to the Issuing Lender) in the related unreimbursed drawing portion of the
LOC Obligation and in the interest thereon and in the related LOC
Documents, and shall have a claim against the Borrower with respect
thereto.
(e) REPAYMENT WITH REVOLVING LOANS. On any day on which the Borrower
shall have requested, or been deemed to have requested, a Revolving Loan
advance to reimburse a drawing under a Letter of Credit, the Agent shall
give notice to the Lenders that a Revolving Loan has been requested or
deemed requested by the Borrower to be made in connection with a drawing
under a Letter of Credit, in which case a Revolving Loan advance comprised
of Base Rate Loans (or Eurodollar Loans to the extent the Borrower has
complied with the procedures of Section 2.1(b)(i) with respect thereto)
shall be immediately made to the Borrower by all Lenders (notwithstanding
any termination of the Commitments pursuant to Section 9.2) PRO RATA based
on the respective Revolving Commitment Percentages of the Lenders
(determined before giving effect to any termination of the Commitments
pursuant to Section 9.2) and the proceeds thereof shall be paid directly
to the Issuing Lender for application to the respective LOC Obligations.
Each such Lender hereby irrevocably agrees to make its pro rata share of
each such Revolving Loan immediately upon any such request or deemed
request in the amount, in the manner and on the date specified in the
preceding sentence NOTWITHSTANDING (i) the amount of such borrowing may
not comply with the minimum amount for advances of Revolving Loans
otherwise required hereunder, (ii) whether any conditions specified in
Section 5.2 are then satisfied, (iii) whether a Default or an Event of
Default then exists, (iv) failure for any such request or deemed request
for Revolving Loan to be made by the time otherwise required hereunder,
(v) whether the date of such borrowing is a date on which Revolving Loans
are
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otherwise permitted to be made hereunder or (vi) any termination of the
Commitments relating thereto immediately prior to or contemporaneously
with such borrowing. In the event that any Revolving Loan cannot for any
reason be made on the date otherwise required above (including, without
limitation, as a result of the commencement of a proceeding under the
Bankruptcy Code with respect to the Borrower or any Credit Party), then
each such Lender hereby agrees that it shall forthwith purchase (as of the
date such borrowing would otherwise have occurred, but adjusted for any
payments received from the Borrower on or after such date and prior to
such purchase) from the Issuing Lender such Participation Interests in the
outstanding LOC Obligations as shall be necessary to cause each such
Lender to share in such LOC Obligations ratably (based upon the respective
Revolving Commitment Percentages of the Lenders (determined before giving
effect to any termination of the Commitments pursuant to Section 9.2)),
PROVIDED that at the time any purchase of Participation Interests pursuant
to this sentence is actually made, the purchasing Lender shall be required
to pay to the Issuing Lender, to the extent not paid to the Issuer by the
Borrower in accordance with the terms of subsection (d) above, interest on
the principal amount of Participation Interests purchased for each day
from and including the day upon which such borrowing would otherwise have
occurred to but excluding the date of payment for such Participation
Interests, at the rate equal to, if paid within two (2) Business Days of
the date of the Revolving Loan advance, the Federal Funds Rate, and
thereafter at a rate equal to the Base Rate.
(f) DESIGNATION OF CONSOLIDATED PARTIES AS ACCOUNT PARTIES.
Notwithstanding anything to the contrary set forth in this Credit
Agreement, including without limitation Section 2.2(a), a Letter of Credit
issued hereunder may contain a statement to the effect that such Letter of
Credit is issued for the account of a Consolidated Party other than the
Borrower, provided that notwithstanding such statement, the Borrower shall
be the actual account party for all purposes of this Credit Agreement for
such Letter of Credit and such statement shall not affect the Borrower's
reimbursement obligations hereunder with respect to such Letter of Credit.
(g) RENEWAL, EXTENSION. The renewal or extension of any Letter
of Credit shall, for purposes hereof, be treated in all respects the same
as the issuance of a new Letter of Credit hereunder.
(h) UNIFORM CUSTOMS AND PRACTICES. The Issuing Lender may have the
Letters of Credit be subject to The Uniform Customs and Practice for
Documentary Credits, as published as of the date of issue by the
International Chamber of Commerce (the "UCP"), in which case the UCP may
be incorporated therein and deemed in all respects to be a part thereof.
(i) INDEMNIFICATION; NATURE OF ISSUING LENDER'S DUTIES.
(i) In addition to its other obligations under this Section
2.2, the Borrower hereby agrees to pay, and protect, indemnify and
save each Lender harmless from and against, any and all claims,
demands, liabilities, damages, losses, costs, charges and expenses
(including reasonable attorneys' fees) that such Lender may incur or
be subject to as a consequence, direct or indirect, of (A) the
issuance of any Letter of Credit or (B) the failure of such Lender
to honor a drawing under a Letter of Credit as a result of any act
or omission, whether rightful or wrongful, of any present or future
de
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jure or de facto government or Governmental Authority (all such acts
or omissions, herein called "Government Acts").
(ii) As between the Borrower and the Lenders (including the
Issuing Lender), the Borrower shall assume all risks of the acts,
omissions or misuse of any Letter of Credit by the beneficiary
thereof. No Lender (including the Issuing Lender) shall be
responsible: (A) for the form, validity, sufficiency, accuracy,
genuineness or legal effect of any document submitted by any party
in connection with the application for and issuance of any Letter of
Credit, even if it should in fact prove to be in any or all respects
invalid, insufficient, inaccurate, fraudulent or forged; (B) for the
validity or sufficiency of any instrument transferring or assigning
or purporting to transfer or assign any Letter of Credit or the
rights or benefits thereunder or proceeds thereof, in whole or in
part, that may prove to be invalid or ineffective for any reason;
(C) for errors, omissions, interruptions or delays in transmission
or delivery of any messages, by mail, cable, telegraph, telex or
otherwise, whether or not they be in cipher; (D) for any loss or
delay in the transmission or otherwise of any document required in
order to make a drawing under a Letter of Credit or of the proceeds
thereof; and (E) for any consequences arising from causes beyond the
control of such Lender, including, without limitation, any
Government Acts. None of the above shall affect, impair, or prevent
the vesting of the Issuing Lender's rights or powers hereunder.
(iii) In furtherance and extension and not in limitation of
the specific provisions hereinabove set forth, any action taken or
omitted by any Lender (including the Issuing Lender), under or in
connection with any Letter of Credit or the related certificates, if
taken or omitted in good faith, shall not put such Lender under any
resulting liability to the Borrower or any other Credit Party. It is
the intention of the parties that this Credit Agreement shall be
construed and applied to protect and indemnify each Lender
(including the Issuing Lender) against any and all risks involved in
the issuance of the Letters of Credit, all of which risks are hereby
assumed by the Borrower (on behalf of itself and each of the other
Credit Parties), including, without limitation, any and all
Government Acts. No Lender (including the Issuing Lender) shall, in
any way, be liable for any failure by such Lender or anyone else to
pay any drawing under any Letter of Credit as a result of any
Government Acts or any other cause beyond the control of such
Lender.
(iv) Nothing in this subsection (i) is intended to limit the
reimbursement obligations of the Borrower contained in subsection
(d) above. The obligations of the Borrower under this subsection (i)
shall survive the termination of this Credit Agreement. No act or
omissions of any current or prior beneficiary of a Letter of Credit
shall in any way affect or impair the rights of the Lenders
(including the Issuing Lender) to enforce any right, power or
benefit under this Credit Agreement.
(v) Notwithstanding anything to the contrary contained in
this subsection (i), the Borrower shall have no obligation to
indemnify any Lender (including the Issuing Lender) in respect of
any liability incurred by such Lender (A) arising solely out of the
gross negligence or willful misconduct of such Lender, as determined
by a court of
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competent jurisdiction, or (B) caused by such Lender's failure to
pay under any Letter of Credit after presentation to it of a request
strictly complying with the terms and conditions of such Letter of
Credit, as determined by a court of competent jurisdiction, unless
such payment is prohibited by any law, regulation, court order or
decree.
(j) RESPONSIBILITY OF ISSUING LENDER. It is expressly understood and
agreed that the obligations of the Issuing Lender hereunder to the Lenders
are only those expressly set forth in this Credit Agreement and that the
Issuing Lender shall be entitled to assume that the conditions precedent
set forth in Section 5.2 have been satisfied unless it shall have acquired
actual knowledge that any such condition precedent has not been satisfied;
PROVIDED, HOWEVER, that nothing set forth in this Section 2.2 shall be
deemed to prejudice the right of any Lender to recover from the Issuing
Lender any amounts made available by such Lender to the Issuing Lender
pursuant to this Section 2.2 in the event that it is determined by a court
of competent jurisdiction that the payment with respect to a Letter of
Credit constituted gross negligence or willful misconduct on the part of
the Issuing Lender.
(k) CONFLICT WITH LOC DOCUMENTS. In the event of any conflict
between this Credit Agreement and any LOC Document (including any letter
of credit application), this Credit Agreement shall control.
SECTION 3
OTHER PROVISIONS RELATING TO CREDIT FACILITIES
3.1 DEFAULT RATE.
Upon the occurrence, and during the continuance, of an Event of Default,
the principal of and, to the extent permitted by law, interest on the Loans and
any other amounts owing hereunder or under the other Credit Documents shall bear
interest, payable on demand, at a per annum rate equal to the Base Rate PLUS 2%.
3.2 EXTENSION AND CONVERSION.
Subject to the terms of Section 5.2, the Borrower shall have the option,
on any Business Day, to extend existing Loans into a subsequent permissible
Interest Period or to convert Loans into Loans of another interest rate type;
PROVIDED, HOWEVER, that (i) except as provided in Section 3.8, Eurodollar Loans
may be converted into Base Rate Loans only on the last day of the Interest
Period applicable thereto, (ii) Eurodollar Loans may be extended, and Base Rate
Loans may be converted into Eurodollar Loans, only if no Default or Event of
Default is in existence on the date of extension or conversion, (iii) Loans
extended as, or converted into, Eurodollar Loans shall be subject to the terms
of the definition of "INTEREST PERIOD" set forth in Section 1.1 and shall be in
such minimum amounts as provided in Section 2.1(b)(ii), or (iv) no more than 5
Eurodollar Loans shall be outstanding hereunder at any time (it being understood
that, for purposes hereof, Eurodollar Loans with different Interest Periods
shall be considered as separate Eurodollar Loans, even if they begin on the same
date, although borrowings, extensions and conversions may, in accordance with
the provisions hereof, be combined at
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the end of existing Interest Periods to constitute a new Eurodollar Loan with a
single Interest Period) and (v) any request for extension or conversion of a
Eurodollar Loan which shall fail to specify an Interest Period shall be deemed
to be a request for an Interest Period of one month. Each such extension or
conversion shall be effected by the Borrower by giving a Notice of
Extension/Conversion (or telephonic notice promptly confirmed in writing) to the
office of the Agent specified in specified in SCHEDULE 2.1(a), or at such other
office as the Agent may designate in writing, prior to 11:00 A.M. (Charlotte,
North Carolina time) on the Business Day of, in the case of the conversion of a
Eurodollar Loan into a Base Rate Loan, and on the third Business Day prior to,
in the case of the extension of a Eurodollar Loan as, or conversion of a Base
Rate Loan into, a Eurodollar Loan, the date of the proposed extension or
conversion, specifying the date of the proposed extension or conversion, the
Loans to be so extended or converted, the types of Loans into which such Loans
are to be converted and, if appropriate, the applicable Interest Periods with
respect thereto. Each request for extension or conversion shall be irrevocable
and shall constitute a representation and warranty by the Borrower of the
matters specified in subsections (b), (c) and (d) of Section 5.2. In the event
the Borrower fails to request extension or conversion of any Eurodollar Loan in
accordance with this Section, or any such conversion or extension is not
permitted or required by this Section, then such Eurodollar Loan shall be
automatically converted into a Base Rate Loan at the end of the Interest Period
applicable thereto. The Agent shall give each Lender notice as promptly as
practicable of any such proposed extension or conversion affecting any Loan.
3.3 PREPAYMENTS.
(a) VOLUNTARY PREPAYMENTS. Upon the written notice (or telephonic
notice promptly confirmed in writing) in the form attached hereto as
EXHIBIT 3.3(a) (a "NOTICE OF PREPAYMENT") to the Agent not later than
11:00 A.M. (Charlotte, North Carolina time) on the date which is 3
Business Days prior to the date of the prepayment in the case of
Eurodollar Loans (which, to the extent any Eurodollar Loan outstanding
shall be greater than $600,000 shall be in a minimum amount of $100,000
(i.e.- a $700,000 Loan could be reduced to $600,000) but in the event that
any Eurodollar Loan shall be $500,000 then such payment shall be in a
minimum amount of $500,000), and on the Business Day prior to the date of
prepayment in the case of Base Rate Loans (which shall be in a minimum
amount of $100,000), the Borrower shall have the right to prepay Loans in
whole or in part from time to time without premium or penalty. Subject to
the foregoing terms, amounts prepaid under this Section 3.3(a) in each
case shall be applied first to Base Rate Loans and then to Eurodollar
Loans in direct order of Interest Period maturities. All prepayments under
this Section 3.3(a) shall be subject to Section 3.12.
(b) MANDATORY PREPAYMENTS.
(i) REVOLVING COMMITTED AMOUNT. If at any time, the sum of
the aggregate principal amount of outstanding Revolving Loans PLUS
LOC Obligations outstanding shall exceed the Revolving Committed
Amount, the Borrower immediately shall prepay the Revolving Loans
and (after all Revolving Loans have been repaid) cash collateralize
the LOC Obligations, in an amount sufficient to eliminate such
excess.
(ii) APPLICATION OF MANDATORY PREPAYMENTS. All amounts
required to be paid pursuant to this Section 3.3(b) shall be applied
first to Base Rate Loans and then
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to Eurodollar Loans in direct order of Interest Period maturities.
All prepayments under this Section 3.3(b) shall be subject to
Section 3.12.
3.4 TERMINATION AND REDUCTION OF REVOLVING COMMITTED AMOUNT.
(a) VOLUNTARY REDUCTIONS. The Borrower may from time to time
permanently reduce or terminate the Revolving Committed Amount in whole or
in part (in minimum aggregate amounts of $1,000,000 or in integral
multiples of $100,000 in excess thereof (or, if less, the full remaining
amount of the then applicable Revolving Committed Amount)) upon five
Business Days' prior written notice to the Agent; PROVIDED, HOWEVER, no
such termination or reduction shall be made which would cause the
aggregate principal amount of outstanding Revolving Loans PLUS LOC
Obligations outstanding to exceed the Revolving Committed Amount, unless,
concurrently with such termination or reduction, the Revolving Loans are
repaid to the extent necessary to eliminate such excess. The Agent shall
promptly notify each affected Lender of receipt by the Agent of any notice
from the Borrower pursuant to this Section 3.4(a).
(b) MATURITY DATE. The Revolving Commitments of the Lenders and the
LOC Commitment of the Issuing Lender shall automatically terminate on (i)
the Maturity Date or (ii) the date upon which Indebtedness incurred
pursuant to Section 8.1(g) shall cause the Revolving Committed Amount to
be reduced to $0.
(c) GENERAL. The Borrower shall pay to the Agent for the account of
the Lenders in accordance with the terms of Section 3.5(a), on the date of
each termination or reduction of the Revolving Committed Amount, the
Commitment Fee accrued through the date of such termination or reduction
on the amount of the Revolving Committed Amount so terminated or reduced.
3.5 FEES.
(a) COMMITMENT FEE. In consideration of the Revolving Commitments of
the Lenders hereunder, the Borrower agrees to pay to the Agent for the
account of each Lender a fee (the "COMMITMENT FEE") on such Lender's
Revolving Credit Percentage of the unused portion of the Revolving
Committed Amount computed at a per annum rate for each day during the
applicable Commitment Fee Calculation Period (hereinafter defined) at a
rate equal to the Applicable Margin in effect from time to time. The
Commitment Fee shall commence to accrue on the Closing Date and shall be
due and payable in arrears on the last Business Day of each March, June,
September and December (and any date that the Revolving Committed Amount
is reduced as provided in Section 3.4(a) and the Maturity Date) for the
immediately preceding quarter (or portion thereof) (each such quarter or
portion thereof for which the Commitment Fee is payable hereunder being
herein referred to as an "COMMITMENT FEE CALCULATION PERIOD"), beginning
with the first of such dates to occur after the Closing Date.
(b) LETTER OF CREDIT FEES.
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(i) LETTER OF CREDIT ISSUANCE FEE. In consideration of
the issuance of standby Letters of Credit hereunder, the
Borrower promises to pay to the Agent for the account of each
Lender a fee (the "STANDBY LETTER OF CREDIT FEE") on such
Lender's Revolving Commitment Percentage of the average daily
maximum amount available to be drawn under each such standby
Letter of Credit computed at a per annum rate for each day
from the date of issuance to the date of expiration equal to
the Applicable Margin. The Standby Letter of Credit Fee will
be payable quarterly in arrears on the last Business Day of
each March, June, September and December for the immediately
preceding quarter (or a portion thereof).
(ii) TRADE LETTER OF CREDIT DRAWING FEE. In
consideration of the issuance of trade Letters of Credit
hereunder, the Borrower promises to pay to the Agent for the
account of each Lender at the time of such issuance a fee (the
"TRADE LETTER OF CREDIT FEE") equal to one quarter of one
percent (1/4%) on such Lender's Revolving Commitment
Percentage of the amount of each drawing under any such trade
Letter of Credit. The Trade Letter of Credit Fee will be
payable quarterly in arrears on the last Business Day of each
March, June, September and December for the immediately
preceding quarter (or a portion thereof).
(iii)ISSUING LENDER FEES. In addition to the Standby
Letter of Credit Fee payable pursuant to clause (i) above and
the Trade Letter of Credit Fee payable pursuant to clause (ii)
above, the Borrower promises to pay to the Issuing Lender for
its own account without sharing by the other Lenders the
letter of credit fronting and negotiation fees equal to
one-eighth of one percent (1/8%) of the face amount of such
Letter of Credit and the customary charges from time to time
of the Issuing Lender with respect to the issuance, amendment,
transfer, administration, cancellation and conversion of, and
drawings under, such Letters of Credit (collectively, the
"ISSUING LENDER FEES").
(c) ADMINISTRATIVE FEES. The Borrower agrees to pay to the
Agent, for its own account, as applicable, the fees referred to in the
Agent's Fee Letter (collectively, the "AGENT'S FEES").
3.6 CAPITAL ADEQUACY.
If any Lender has determined, after the date hereof, that the adoption or
the becoming effective of, or any change in, or any change by any Governmental
Authority, central bank or comparable agency charged with the interpretation or
administration thereof in the interpretation or administration of, any
applicable law, rule or regulation regarding capital adequacy, or compliance by
such Lender with any request or directive regarding capital adequacy (whether or
not having the force of law) of any such authority, central bank or comparable
agency, has or would have the effect of reducing the rate of return on such
Lender's capital or assets as a consequence of its commitments or obligations
hereunder to a level below that which such Lender could have achieved but for
such adoption, effectiveness, change or compliance (taking into consideration
such Lender's policies with respect to
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capital adequacy), then, upon notice from such Lender to the Borrower (such
notice to be given within six calendar months of the Lender's determination
thereof), the Borrower shall be obligated to pay to such Lender such additional
amount or amounts as will compensate such Lender for such reduction. Each
determination by any such Lender of amounts owing under this Section shall,
absent manifest error, be conclusive and binding on the parties hereto.
3.7 LIMITATION ON EURODOLLAR LOANS.
If on or prior to the first day of any Interest Period for any Eurodollar
Loan:
(a) the Agent determines (which determination shall be conclusive)
that by reason of circumstances affecting the relevant market, adequate
and reasonable means do not exist for ascertaining the Eurodollar Rate for
such Interest Period; or
(b) the Required Lenders determine (which determination shall be
conclusive) and notify the Agent that the Eurodollar Rate will not
adequately and fairly reflect the cost to the Lenders of funding
Eurodollar Loans for such Interest Period;
then the Agent shall give the Borrower prompt notice thereof, and so long as
such condition remains in effect, the Lenders shall be under no obligation to
make additional Eurodollar Loans, Continue Eurodollar Loans, or to Convert Base
Rate Loans into Eurodollar Loans and the Borrower shall, on the last day(s) of
the then current Interest Period(s) for the outstanding Eurodollar Loans, either
prepay such Eurodollar Loans or Convert such Eurodollar Loans into Base Rate
Loans in accordance with the terms of this Credit Agreement.
3.8 ILLEGALITY.
Notwithstanding any other provision of this Credit Agreement, in the event
that it becomes unlawful for any Lender or its Applicable Lending Office to
make, maintain, or fund Eurodollar Loans hereunder, then such Lender shall
promptly notify the Borrower thereof and such Lender's obligation to make or
Continue Eurodollar Loans and to Convert Base Rate Loans into Eurodollar Loans
shall be suspended until such time as such Lender may again make, maintain, and
fund Eurodollar Loans (in which case the provisions of Section 3.10 shall be
applicable).
3.9 REQUIREMENTS OF LAW.
(a) If, after the date hereof, the adoption of any applicable law, rule,
or regulation, or any change in any applicable law, rule, or regulation, or any
change in the interpretation or administration thereof by any Governmental
Authority, central bank, or comparable agency charged with the interpretation or
administration thereof, or compliance by any Lender (or its Applicable Lending
Office) with any request or directive (whether or not having the force of law)
of any such Governmental Authority, central bank, or comparable agency:
(i) shall subject such Lender (or its Applicable Lending Office)
to any tax, duty, or other charge with respect to any Eurodollar Loans,
its Notes, or its obligation to make Eurodollar Loans, or change the basis
of taxation of any amounts payable to such Lender (or its
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Applicable Lending Office) under this Credit Agreement or its Notes in
respect of any Eurodollar Loans (other than taxes imposed on the overall
net income of such Lender by the jurisdiction in which such Lender has its
principal office or such Applicable Lending Office);
(ii) shall impose, modify, or deem applicable any reserve, special
deposit, assessment, or similar requirement (other than the Eurodollar
Reserve Requirement utilized in the determination of the Adjusted
Eurodollar Rate) relating to any extensions of credit or other assets of,
or any deposits with or other liabilities or commitments of, such Lender
(or its Applicable Lending Office), including the Commitment of such
Lender hereunder; or
(iii) shall impose on such Lender (or its Applicable Lending
Office) or on the United States market for certificates of deposit or the
London interbank market any other condition affecting this Credit
Agreement or its Notes or any of such extensions of credit or liabilities
or commitments;
and the result of any of the foregoing is to increase the cost to such Lender
(or its Applicable Lending Office) of making, Converting into, Continuing, or
maintaining any Eurodollar Loans or to reduce any sum received or receivable by
such Lender (or its Applicable Lending Office) under this Credit Agreement or
its Notes with respect to any Eurodollar Loans, then the Borrower shall pay to
such Lender on demand (such demand to be made within six calendar months of the
Lender's determination thereof) such amount or amounts as will compensate such
Lender for such increased cost or reduction. If any Lender requests compensation
by the Borrower under this Section 3.9(a), the Borrower may, by notice to such
Lender (with a copy to the Agent), suspend the obligation of such Lender to make
or Continue Eurodollar Loans, or to Convert Base Rate Loans into Eurodollar
Loans, until the event or condition giving rise to such request ceases to be in
effect (in which case the provisions of Section 3.10 shall be applicable);
PROVIDED that such suspension shall not affect the right of such Lender to
receive the compensation so requested.
(b) Each Lender shall promptly notify the Borrower and the Agent of any
event of which it has knowledge, occurring after the date hereof, which will
entitle such Lender to compensation pursuant to this Section 3.9 and will
designate a different Applicable Lending Office if such designation will avoid
the need for, or reduce the amount of, such compensation and will not, in the
judgment of such Lender, be otherwise disadvantageous to it. Any Lender claiming
compensation under Section 3.6 or under this Section 3.9 shall furnish to the
Borrower and the Agent a statement setting forth the additional amount or
amounts to be paid to it hereunder which shall be conclusive in the absence of
manifest error. In determining such amount, such Lender may use any reasonable
averaging and attribution methods.
3.10 TREATMENT OF AFFECTED LOANS.
If the obligation of any Lender to make any Eurodollar Loan or to
Continue, or to Convert Base Rate Loans into, Eurodollar Loans shall be
suspended pursuant to Section 3.8 or 3.9 hereof, such Lender's Eurodollar Loans
shall be automatically Converted into Base Rate Loans on the last day(s) of the
then current Interest Period(s) for such Eurodollar Loans (or, in the case of a
Conversion required by Section 3.8 hereof, on such earlier date as such Lender
may specify to the Borrower with a copy to
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the Agent) and, unless and until such Lender gives notice as provided below that
the circumstances specified in Section 3.8 or 3.9 hereof that gave rise to such
Conversion no longer exist:
(a) to the extent that such Lender's Eurodollar Loans have been so
Converted, all payments and prepayments of principal that would otherwise
be applied to such Lender's Eurodollar Loans shall be applied instead to
its Base Rate Loans; and
(b) all Loans that would otherwise be made or Continued by such
Lender as Eurodollar Loans shall be made or Continued instead as Base Rate
Loans, and all Base Rate Loans of such Lender that would otherwise be
Converted into Eurodollar Loans shall remain as Base Rate Loans.
If such Lender gives notice to the Borrower (with a copy to the Agent) that the
circumstances specified in Section 3.8 or 3.9 hereof that gave rise to the
Conversion of such Lender's Eurodollar Loans pursuant to this Section 3.10 no
longer exist (which such Lender agrees to do promptly upon such circumstances
ceasing to exist) at a time when Eurodollar Loans made by other Lenders are
outstanding, such Lender's Base Rate Loans shall be automatically Converted, on
the first day(s) of the next succeeding Interest Period(s) for such outstanding
Eurodollar Loans, to the extent necessary so that, after giving effect thereto,
all Loans held by the Lenders holding Eurodollar Loans and by such Lender are
held pro rata (as to principal amounts, interest rate basis, and Interest
Periods) in accordance with their respective Commitments.
3.11 TAXES.
(a) Any and all payments by the Borrower to or for the account of
any Lender or the Agent hereunder or under any other Credit Document shall
be made free and clear of and without deduction for any and all present or
future taxes, duties, levies, imposts, deductions, charges or
withholdings, and all liabilities with respect thereto, EXCLUDING, in the
case of each Lender and the Agent, taxes imposed on its income, and
franchise taxes imposed on it, by the jurisdiction under the laws of which
such Lender (or its Applicable Lending Office) or the Agent (as the case
may be) is organized or any political subdivision thereof (all such
non-excluded taxes, duties, levies, imposts, deductions, charges,
withholdings, and liabilities being hereinafter referred to as "TAXES").
If the Borrower shall be required by law to deduct any Taxes from or in
respect of any sum payable under this Credit Agreement or any other Credit
Document to any Lender or the Agent, (i) the sum payable shall be
increased as necessary so that after making all required deductions
(including deductions applicable to additional sums payable under this
Section 3.11) such Lender or the Agent receives an amount equal to the sum
it would have received had no such deductions been made, (ii) the Borrower
shall make such deductions, (iii) the Borrower shall pay the full amount
deducted to the relevant taxation authority or other authority in
accordance with applicable law, and (iv) the Borrower shall furnish to the
Agent, at its address referred to in Section 11.1, the original or a
certified copy of a receipt evidencing payment thereof.
(b) In addition, the Borrower agrees to pay any and all present or
future stamp or documentary taxes and any other excise or property taxes
or charges or similar levies which arise from any payment made under this
Credit Agreement or any other Credit Document or
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from the execution or delivery of, or otherwise with respect to, this
Credit Agreement or any other Credit Document (hereinafter referred to as
"OTHER TAXES").
(c) The Borrower agrees to indemnify each Lender and the Agent for
the full amount of Taxes and Other Taxes (including, without limitation,
any Taxes or Other Taxes imposed or asserted by any jurisdiction on
amounts payable under this Section 3.11) paid by such Lender or the Agent
(as the case may be) and any liability (including penalties, interest, and
expenses) arising therefrom or with respect thereto.
(d) Each Lender organized under the laws of a jurisdiction outside
the United States, on or prior to the date of its execution and delivery
of this Credit Agreement in the case of each Lender listed on the
signature pages hereof and on or prior to the date on which it becomes a
Lender in the case of each other Lender, and from time to time thereafter
if requested in writing by the Borrower or the Agent (but only so long as
such Lender remains lawfully able to do so), shall provide the Borrower
and the Agent with (i) Internal Revenue Service Form 1001 or 4224, as
appropriate, or any successor form prescribed by the Internal Revenue
Service, certifying that such Lender is entitled to benefits under an
income tax treaty to which the United States is a party which reduces the
rate of withholding tax on payments of interest or certifying that the
income receivable pursuant to this Credit Agreement is effectively
connected with the conduct of a trade or business in the United States,
(ii) Internal Revenue Service Form W-8 or W-9, as appropriate, or any
successor form prescribed by the Internal Revenue Service, and (iii) any
other form or certificate required by any taxing authority (including any
certificate required by Sections 871(h) and 881(c) of the Internal Revenue
Code), certifying that such Lender is entitled to an exemption from or a
reduced rate of tax on payments pursuant to this Credit Agreement or any
of the other Credit Documents.
(e) For any period with respect to which a Lender has failed to
provide the Borrower and the Agent with the appropriate form pursuant to
Section 3.11(d) (unless such failure is due to a change in treaty, law, or
regulation occurring subsequent to the date on which a form originally was
required to be provided), such Lender shall not be entitled to
indemnification under Section 3.11(a), 3.11(b) or 3.11(c) with respect to
Taxes imposed by the United States; PROVIDED, HOWEVER, that should a
Lender, which is otherwise exempt from or subject to a reduced rate of
withholding tax, become subject to Taxes because of its failure to deliver
a form required hereunder, the Borrower shall take such steps as such
Lender shall reasonably request to assist such Lender to recover such
Taxes.
(f) If the Borrower is required to pay additional amounts to or for
the account of any Lender pursuant to this Section 3.11, then such Lender
will agree to use reasonable efforts to change the jurisdiction of its
Applicable Lending Office so as to eliminate or reduce any such additional
payment which may thereafter accrue if such change, in the judgment of
such Lender, is not otherwise disadvantageous to such Lender.
(g) Within thirty (30) days after the date of any payment of Taxes,
the Borrower shall furnish to the Agent the original or a certified copy
of a receipt evidencing such payment.
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(h) Without prejudice to the survival of any other agreement of the
Borrower hereunder, the agreements and obligations of the Borrower
contained in this Section 3.11 shall survive the repayment of the Loans,
LOC Obligations and other obligations under the Credit Documents and the
termination of the Commitments hereunder.
3.12 COMPENSATION.
Upon the request of any Lender, the Borrower shall pay to such Lender such
amount or amounts as shall be sufficient (in the reasonable opinion of such
Lender) to compensate it for any loss, cost, or expense incurred by it as a
result of:
(a) any payment, prepayment, or Conversion of a Eurodollar Loan for
any reason (including, without limitation, the acceleration of the Loans
pursuant to Section 9.2) on a date other than the last day of the Interest
Period for such Loan; or
(b) any failure by the Borrower for any reason (including, without
limitation, the failure of any condition precedent specified in Section 5
to be satisfied) to borrow, Convert, Continue, or prepay a Eurodollar Loan
on the date for such borrowing, Conversion, Continuation, or prepayment
specified in the relevant notice of borrowing, prepayment, Continuation,
or Conversion under this Credit Agreement.
With respect to Eurodollar Loans, such indemnification may include an amount
equal to the excess, if any, of (a) the amount of interest which would have
accrued on the amount so prepaid, or not so borrowed, converted or continued,
for the period from the date of such prepayment or of such failure to borrow,
convert or continue to the last day of the applicable Interest Period (or, in
the case of a failure to borrow, convert or continue, the Interest Period that
would have commenced on the date of such failure) in each case at the applicable
rate of interest for such Eurodollar Loans provided for herein (excluding,
however, the Applicable Margin included therein, if any) over (b) the amount of
interest (as reasonably determined by such Lender) which would have accrued to
such Lender on such amount by placing such amount on deposit for a comparable
period with leading banks in the interbank Eurodollar market. The covenants of
the Borrower set forth in this Section 3.12 shall survive the repayment of the
Loans, LOC Obligations and other obligations under the Credit Documents and the
termination of the Commitments hereunder.
3.13 PRO RATA TREATMENT.
Except to the extent otherwise provided herein:
(a) LOANS. Each Loan, each payment or (subject to the terms of
Section 3.3) prepayment of principal of any Loan or reimbursement
obligations arising from drawings under Letters of Credit, each payment of
interest on the Loans or reimbursement obligations arising from drawings
under Letters of Credit, each payment of Commitment Fees, each payment of
the Standby Letter of Credit Fee, each payment of the Trade Letter of
Credit Fee, each reduction of the Revolving Committed Amount and each
conversion or extension of any Loan, shall be allocated pro rata among the
Lenders in accordance with the respective principal amounts of their
outstanding Loans and Participation Interests.
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(b) ADVANCES. No Lender shall be responsible for the failure
or delay by any other Lender in its obligation to make its ratable share
of a borrowing hereunder; PROVIDED, HOWEVER, that the failure of any
Lender to fulfill its obligations hereunder shall not relieve any other
Lender of its obligations hereunder. Unless the Agent shall have been
notified by any Lender prior to the date of any requested borrowing that
such Lender does not intend to make available to the Agent its ratable
share of such borrowing to be made on such date, the Agent may assume that
such Lender has made such amount available to the Agent on the date of
such borrowing, and the Agent in reliance upon such assumption, may (in
its sole discretion but without any obligation to do so) make available to
the Borrower a corresponding amount. If such corresponding amount is not
in fact made available to the Agent, the Agent shall be able to recover
such corresponding amount from such Lender. If such Lender does not pay
such corresponding amount forthwith upon the Agent's demand therefor, the
Agent will promptly notify the Borrower, and the Borrower shall
immediately pay such corresponding amount to the Agent. The Agent shall
also be entitled to recover from the Lender or the Borrower, as the case
may be, interest on such corresponding amount in respect of each day from
the date such corresponding amount was made available by the Agent to the
Borrower to the date such corresponding amount is recovered by the Agent
at a per annum rate equal to (i) from the Borrower at the applicable rate
for the applicable borrowing pursuant to the Notice of Borrowing and (ii)
from a Lender at the Federal Funds Rate. Any such payment by the Borrower
shall not operate to relieve any Lender of its obligations hereunder.
3.14 SHARING OF PAYMENTS.
The Lenders agree among themselves that, in the event that any Lender
shall obtain payment in respect of any Loan, LOC Obligations or any other
obligation owing to such Lender under this Credit Agreement through the exercise
of a right of setoff, banker's lien or counterclaim, or pursuant to a secured
claim under Section 506 of Title 11 of the United States Code or other security
or interest arising from, or in lieu of, such secured claim, received by such
Lender under any applicable bankruptcy, insolvency or other similar law or
otherwise, or by any other means, in excess of its pro rata share of such
payment as provided for in this Credit Agreement, such Lender shall promptly
purchase from the other Lenders a Participation Interest in such Loans, LOC
Obligations and other obligations in such amounts, and make such other
adjustments from time to time, as shall be equitable to the end that all Lenders
share such payment in accordance with their respective ratable shares as
provided for in this Credit Agreement. The Lenders further agree among
themselves that if payment to a Lender obtained by such Lender through the
exercise of a right of setoff, banker's lien, counterclaim or other event as
aforesaid shall be rescinded or must otherwise be restored, each Lender which
shall have shared the benefit of such payment shall, by repurchase of a
Participation Interest theretofore sold, return its share of that benefit
(together with its share of any accrued interest payable with respect thereto)
to each Lender whose payment shall have been rescinded or otherwise restored.
The Borrower agrees that any Lender so purchasing such a Participation Interest
may, to the fullest extent permitted by law, exercise all rights of payment,
including setoff, banker's lien or counterclaim, with respect to such
Participation Interest as fully as if such Lender were a holder of such Loan,
LOC Obligations or other obligation in the amount of such Participation
Interest. Except as otherwise expressly provided in this Credit Agreement, if
any Lender or the Agent shall fail to remit to the Agent or any other Lender an
amount payable by such Lender or the Agent to the Agent or such other Lender
pursuant to
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this Credit Agreement on the date when such amount is due, such payments shall
be made together with interest thereon for each day from the date such amount is
due until the date such amount is paid to the Agent or such other Lender at a
rate per annum equal to the Federal Funds Rate. If under any applicable
bankruptcy, insolvency or other similar law, any Lender receives a secured claim
in lieu of a setoff to which this Section 3.14 applies, such Lender shall, to
the extent practicable, exercise its rights in respect of such secured claim in
a manner consistent with the rights of the Lenders under this Section 3.14 to
share in the benefits of any recovery on such secured claim.
3.15 PAYMENTS, COMPUTATIONS, ETC.
(a) Except as otherwise specifically provided herein, all payments
hereunder shall be made to the Agent in Dollars in immediately available
funds, without offset, deduction, counterclaim or withholding of any kind,
at the Agent's office specified in SCHEDULE 2.1(a) not later than 2:00
P.M. (Charlotte, North Carolina time) on the date when due. Payments
received after such time shall be deemed to have been received on the next
succeeding Business Day. The Agent may (but shall not be obligated to)
debit the amount of any such payment which is not made by such time to any
ordinary deposit account of the Borrower maintained with the Agent (with
notice to the Borrower). The Borrower shall, at the time it makes any
payment under this Credit Agreement, specify to the Agent the Loans, LOC
Obligations, Fees, interest or other amounts payable by the Borrower
hereunder to which such payment is to be applied (and in the event that it
fails so to specify, or if such application would be inconsistent with the
terms hereof, the Agent shall distribute such payment to the Lenders in
such manner as the Agent may determine to be appropriate in respect of
obligations owing by the Borrower hereunder, subject to the terms of
Section 3.13(a)). The Agent will distribute such payments to such Lenders,
if any such payment is received prior to 12:00 Noon (Charlotte, North
Carolina time) on a Business Day in like funds as received prior to the
end of such Business Day and otherwise the Agent will distribute such
payment to such Lenders on the next succeeding Business Day. Whenever any
payment hereunder shall be stated to be due on a day which is not a
Business Day, the due date thereof shall be extended to the next
succeeding Business Day (subject to accrual of interest and Fees for the
period of such extension), except that in the case of Eurodollar Loans, if
the extension would cause the payment to be made in the next following
calendar month, then such payment shall instead be made on the next
preceding Business Day. Except as expressly provided otherwise herein, all
computations of interest and fees shall be made on the basis of actual
number of days elapsed over a year of 360 days, except with respect to
computation of interest on Base Rate Loans which (unless the Base Rate is
determined by reference to the Federal Funds Rate) shall be calculated
based on a year of 365 or 366 days, as appropriate. Interest shall accrue
from and include the date of borrowing, but exclude the date of payment.
(b) ALLOCATION OF PAYMENTS AFTER EVENT OF DEFAULT. Notwithstanding
any other provisions of this Credit Agreement to the contrary, after the
occurrence and during the continuance of an Event of Default, all amounts
collected or received by the Agent or any Lender on account of the Credit
Party Obligations or any other amounts outstanding under any of the Credit
Documents or in respect of the Collateral shall be paid over or delivered
as follows:
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FIRST, to the payment of all reasonable out-of-pocket costs and
expenses (including without limitation reasonable attorneys' fees) of the
Agent in connection with enforcing the rights of the Lenders under the
Credit Documents and any protective advances made by the Agent with
respect to the Collateral under or pursuant to the terms of the Collateral
Documents;
SECOND, to payment of any fees owed to the Agent;
THIRD, to the payment of all reasonable out-of-pocket costs and
expenses (including without limitation, reasonable attorneys' fees) of
each of the Lenders payable pursuant to the terms of the Credit Documents
in connection with enforcing its rights under the Credit Documents or
otherwise with respect to the Credit Party Obligations owing to such
Lender;
FOURTH, to the payment of all of the Credit Party Obligations
consisting of accrued fees and interest;
FIFTH, to the payment of the outstanding principal amount of the
Credit Party Obligations (including the payment or cash collateralization
of the outstanding LOC Obligations);
SIXTH, to all other Credit Party Obligations and other obligations
which shall have become due and payable under the Credit Documents or
otherwise and not repaid pursuant to clauses "FIRST" through "FIFTH"
above; and
SEVENTH, to the payment of the surplus, if any, to whoever may be
lawfully entitled to receive such surplus.
In carrying out the foregoing, (i) amounts received shall be applied in
the numerical order provided until exhausted prior to application to the
next succeeding category; (ii) each of the Lenders shall receive an amount
equal to its pro rata share (based on the proportion that the then
outstanding Loans and LOC Obligations held by such Lender bears to the
aggregate then outstanding Loans and LOC Obligations) of amounts available
to be applied pursuant to clauses "THIRD", "FOURTH", "FIFTH" and "SIXTH"
above; and (iii) to the extent that any amounts available for distribution
pursuant to clause "FIFTH" above are attributable to the issued but
undrawn amount of outstanding Letters of Credit, such amounts shall be
held by the Agent in a cash collateral account and applied (A) first, to
reimburse the Issuing Lender from time to time for any drawings under such
Letters of Credit and (B) then, following the expiration of all Letters of
Credit, to all other obligations of the types described in clauses "FIFTH"
and "SIXTH" above in the manner provided in this Section 3.15(b).
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3.16 EVIDENCE OF DEBT.
(a) Each Lender shall maintain an account or accounts evidencing
each Loan made by such Lender to the Borrower from time to time, including
the amounts of principal and interest payable and paid to such Lender from
time to time under this Credit Agreement. Each Lender will make reasonable
efforts to maintain the accuracy of its account or accounts and to
promptly update its account or accounts from time to time, as necessary.
(b) The Agent shall maintain the Register pursuant to Section
11.3(c), and a subaccount for each Lender, in which Register and
subaccounts (taken together) shall be recorded (i) the amount, type and
Interest Period of each such Loan hereunder, (ii) the amount of any
principal or interest due and payable or to become due and payable to each
Lender hereunder and (iii) the amount of any sum received by the Agent
hereunder from or for the account of the Borrower and each Lender's share
thereof. The Agent will make reasonable efforts to maintain the accuracy
of the subaccounts referred to in the preceding sentence and to promptly
update such subaccounts from time to time, as necessary.
(c) The entries made in the accounts, Register and subaccounts
maintained pursuant to subsection (b) of this Section 3.16 (and, if
consistent with the entries of the Agent, subsection (a)) shall be prima
facie evidence of the existence and amounts of the obligations of the
Borrower therein recorded; PROVIDED, HOWEVER, that the failure of any
Lender or the Agent to maintain any such account, such Register or such
subaccount, as applicable, or any error therein, shall not in any manner
affect the obligation of the Borrower to repay the Loans made by such
Lender in accordance with the terms hereof.
3.17 ASSIGNMENT OF COMMITMENT UNDER CERTAIN CIRCUMSTANCES
In the event (a) any Lender requests compensation pursuant to
Section 3.12, (b) any Lender delivers a notice described in Sections 3.6, 3.8 or
3.9 or (c) the Borrower is required to pay any additional amount to any Lender
or any Governmental Authority on account of any Lender pursuant to Section 3.11,
the Borrower may, at its sole expense and effort (including with respect to the
processing and recordation fee referred to in Section 11.3), upon notice to such
Lender and the Agent, require such Lender to transfer and assign, without
recourse (in accordance with and subject to the restrictions contained in
Section 11.3), all of its interests, rights and obligations under this Agreement
to an Eligible Assignee that shall assume such assigned obligations (which
assignee may be another Lender, if a Lender accepts such assignment), PROVIDED
that (A) such assignment shall not conflict with any law, rule or regulation or
order of any court or other Governmental Authority having jurisdiction, (B) no
Event of Default shall have occurred and be continuing and (C) the Borrower or
such assignee shall have paid to the affected Lender in immediately available
funds an amount equal to the sum of 100% of the principal of and interest
accrued to the date of such payment on the outstanding Loans of such Lender,
respectively, plus all Fees and other amounts accrued for the account of such
Lender hereunder (including any amounts under Sections 3.6, 3.9, 3.11 and 3.12);
PROVIDED FURTHER that if prior to any such assignment the circumstances or event
that resulted in such Lender's request or notice under Sections 3.6, 3.8 or 3.9
or demand for additional amounts under Section 3.11 or 3.12, as the case may be,
shall cease to exist or become inapplicable for any reason or if such Lender
shall waive its rights in
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respect of such circumstances or event under Section 3.6, 3.8, 3.9, 3.11 or 3.12
as the case may be, then such Lender shall not thereafter be required to make
such assignment hereunder.
SECTION 4
GUARANTY
4.1 THE GUARANTY.
Each of the Guarantors hereby jointly and severally guarantees to each
Lender, each Affiliate of a Lender that enters into a Hedging Agreement, and the
Agent as hereinafter provided the prompt payment of the Credit Party Obligations
in full when due (whether at stated maturity, as a mandatory prepayment, by
acceleration, as a mandatory cash collateralization or otherwise) strictly in
accordance with the terms thereof. The Guarantors hereby further agree that if
any of the Credit Party Obligations are not paid in full when due (whether at
stated maturity, as a mandatory prepayment, by acceleration, as a mandatory cash
collateralization or otherwise), the Guarantors will, jointly and severally,
promptly pay the same, without any demand or notice whatsoever, and that in the
case of any extension of time of payment or renewal of any of the Credit Party
Obligations, the same will be promptly paid in full when due (whether at
extended maturity, as a mandatory prepayment, by acceleration, as a mandatory
cash collateralization or otherwise) in accordance with the terms of such
extension or renewal.
Notwithstanding any provision to the contrary contained herein or in any
other of the Credit Documents or Hedging Agreements, the obligations of each
Guarantor hereunder shall be limited to an aggregate amount equal to the largest
amount that would not render its obligations hereunder subject to avoidance
under Section 548 of the Bankruptcy Code or any comparable provisions of any
applicable state law.
4.2 OBLIGATIONS UNCONDITIONAL.
The obligations of the Guarantors under Section 4.1 are joint and several,
absolute and unconditional, irrespective of the value, genuineness, validity,
regularity or enforceability of any of the Credit Documents or Hedging
Agreements, or any other agreement or instrument referred to therein, or any
substitution, release, impairment or exchange of any other guarantee of or
security for any of the Credit Party Obligations, and, to the fullest extent
permitted by applicable law, irrespective of any other circumstance whatsoever
which might otherwise constitute a legal or equitable discharge or defense of a
surety or guarantor, it being the intent of this Section 4.2 that the
obligations of the Guarantors hereunder shall be absolute and unconditional
under any and all circumstances. Each Guarantor agrees that such Guarantor shall
have no right of subrogation, indemnity, reimbursement or contribution against
the Borrower or any other Guarantor of the Credit Party Obligations for amounts
paid under this Section 4 until such time as the Lenders (and any Affiliates of
Lenders entering into Hedging Agreements) have been paid in full, all
Commitments under this Credit Agreement have been terminated and no Person or
Governmental Authority shall have any right to request any return or
reimbursement of funds from the Lenders in connection with monies received under
the Credit Documents or Hedging Agreements. Without limiting the generality of
the foregoing, it is agreed that, to the fullest extent permitted by law, the
occurrence of any one or more of the following shall not alter
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or impair the liability of any Guarantor hereunder which shall remain absolute
and unconditional as described above:
(a) at any time or from time to time, without notice to any
Guarantor, the time for any performance of or compliance with any of the
Credit Party Obligations shall be extended, or such performance or
compliance shall be waived;
(b) any of the acts mentioned in any of the provisions of any of the
Credit Documents, any Hedging Agreement or any other agreement or
instrument referred to in the Credit Documents or Hedging Agreements shall
be done or omitted;
(c) the maturity of any of the Credit Party Obligations shall be
accelerated, or any of the Credit Party Obligations shall be modified,
supplemented or amended in any respect, or any right under any of the
Credit Documents, any Hedging Agreement or any other agreement or
instrument referred to in the Credit Documents or Hedging Agreements shall
be waived or any other guarantee of any of the Credit Party Obligations or
any security therefor shall be released, impaired or exchanged in whole or
in part or otherwise dealt with;
(d) any Lien granted to, or in favor of, the Agent or any Lender or
Lenders as security for any of the Credit Party Obligations shall fail to
attach or be perfected; or
(e) any of the Credit Party Obligations shall be determined to be
void or voidable (including, without limitation, for the benefit of any
creditor of any Guarantor) or shall be subordinated to the claims of any
Person (including, without limitation, any creditor of any Guarantor).
With respect to its obligations hereunder, each Guarantor hereby expressly
waives diligence, presentment, demand of payment, protest and all notices
whatsoever, and any requirement that the Agent or any Lender exhaust any right,
power or remedy or proceed against any Person under any of the Credit Documents,
any Hedging Agreement or any other agreement or instrument referred to in the
Credit Documents or Hedging Agreements, or against any other Person under any
other guarantee of, or security for, any of the Credit Party Obligations.
4.3 REINSTATEMENT.
The obligations of the Guarantors under this Section 4 shall be
automatically reinstated if and to the extent that for any reason any payment by
or on behalf of any Person in respect of the Credit Party Obligations is
rescinded or must be otherwise restored by any holder of any of the Credit Party
Obligations, whether as a result of any proceedings in bankruptcy or
reorganization or otherwise, and each Guarantor agrees that it will indemnify
the Agent and each Lender on demand for all reasonable costs and expenses
(including, without limitation, fees and expenses of counsel) incurred by the
Agent or such Lender in connection with such rescission or restoration,
including any such costs and expenses incurred in defending against any claim
alleging that such payment constituted a preference, fraudulent transfer or
similar payment under any bankruptcy, insolvency or similar law.
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4.4 CERTAIN ADDITIONAL WAIVERS.
Without limiting the generality of the provisions of this Section 4, each
Guarantor hereby specifically waives the benefits of N.C. Gen. Stat. secs. 26-7
through 26-9, inclusive, to the extent applicable. Each Guarantor further agrees
that such Guarantor shall have no right of recourse to security for the Credit
Party Obligations, except through the exercise of rights of subrogation pursuant
to Section 4.2 and through the exercise of rights of contribution pursuant to
Section 4.6.
4.5 REMEDIES.
The Guarantors agree that, to the fullest extent permitted by law, as
between the Guarantors, on the one hand, and the Agent and the Lenders, on the
other hand, the Credit Party Obligations may be declared to be forthwith due and
payable as provided in Section 9.2 (and shall be deemed to have become
automatically due and payable in the circumstances provided in said Section 9.2)
for purposes of Section 4.1 notwithstanding any stay, injunction or other
prohibition preventing such declaration (or preventing the Credit Party
Obligations from becoming automatically due and payable) as against any other
Person and that, in the event of such declaration (or the Credit Party
Obligations being deemed to have become automatically due and payable), the
Credit Party Obligations (whether or not due and payable by any other Person)
shall forthwith become due and payable by the Guarantors for purposes of Section
4.1. The Guarantors acknowledge and agree that their obligations hereunder are
secured in accordance with the terms of the Security Agreements and the other
Collateral Documents and that the Lenders may exercise their remedies thereunder
in accordance with the terms thereof.
4.6 RIGHTS OF CONTRIBUTION.
The Guarantors hereby agree as among themselves that, if any Guarantor
shall make an Excess Payment (as defined below), such Guarantor shall have a
right of contribution from each other Guarantor in an amount equal to such other
Guarantor's Contribution Share (as defined below) of such Excess Payment. The
payment obligations of any Guarantor under this Section 4.6 shall be subordinate
and subject in right of payment to the prior payment in full to the Agent and
the Lenders of the Guaranteed Obligations, and none of the Guarantors shall
exercise any right or remedy under this Section 4.6 against any other Guarantor
until payment and satisfaction in full of all of such Guaranteed Obligations.
For purposes of this Section 4.6, (a) "GUARANTEED OBLIGATIONS" shall mean any
obligations arising under the other provisions of this Section 4; (b) "EXCESS
PAYMENT" shall mean the amount paid by any Guarantor in excess of its Pro Rata
Share of any Guaranteed Obligations; (c) "PRO RATA SHARE" shall mean, for any
Guarantor in respect of any payment of Guaranteed Obligations, the ratio
(expressed as a percentage) as of the date of such payment of Guaranteed
Obligations of (i) the amount by which the aggregate present fair salable value
of all of its assets and properties exceeds the amount of all debts and
liabilities of such Guarantor (including contingent, subordinated, unmatured,
and unliquidated liabilities, but excluding the obligations of such Guarantor
hereunder) to (ii) the amount by which the aggregate present fair salable value
of all assets and other properties of the Borrower and all of the Guarantors
exceeds the amount of all of the debts and liabilities (including contingent,
subordinated, unmatured, and unliquidated liabilities, but excluding the
obligations of the Borrower and the Guarantors hereunder) of the Borrower and
all of the Guarantors; PROVIDED, HOWEVER, that, for purposes of calculating the
Pro Rata Shares of the Guarantors in respect of any payment of Guaranteed
Obligations, any Guarantor that became a Guarantor subsequent to the date of any
such payment shall
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be deemed to have been a Guarantor on the date of such payment and the financial
information for such Guarantor as of the date such Guarantor became a Guarantor
shall be utilized for such Guarantor in connection with such payment; and (d)
"CONTRIBUTION SHARE" shall mean, for any Guarantor in respect of any Excess
Payment made by any other Guarantor, the ratio (expressed as a percentage) as of
the date of such Excess Payment of (i) the amount by which the aggregate present
fair salable value of all of its assets and properties exceeds the amount of all
debts and liabilities of such Guarantor (including contingent, subordinated,
unmatured, and unliquidated liabilities, but excluding the obligations of such
Guarantor hereunder) to (ii) the amount by which the aggregate present fair
salable value of all assets and other properties of the Borrower and all of the
Guarantors other than the maker of such Excess Payment exceeds the amount of all
of the debts and liabilities (including contingent, subordinated, unmatured, and
unliquidated liabilities, but excluding the obligations of the Borrower and the
Guarantors hereunder) of the Borrower and all of the Guarantors other than the
maker of such Excess Payment; PROVIDED, HOWEVER, that, for purposes of
calculating the Contribution Shares of the Guarantors in respect of any Excess
Payment, any Guarantor that became a Guarantor subsequent to the date of any
such Excess Payment shall be deemed to have been a Guarantor on the date of such
Excess Payment and the financial information for such Guarantor as of the date
such Guarantor became a Guarantor shall be utilized for such Guarantor in
connection with such Excess Payment. This Section 4.6 shall not be deemed to
affect any right of subrogation, indemnity, reimbursement or contribution that
any Guarantor may have under applicable law against the Borrower in respect of
any payment of Guaranteed Obligations. Notwithstanding the foregoing, all rights
of contribution against any Guarantor shall terminate from and after such time,
if ever, that such Guarantor shall be relieved of its obligations pursuant to
Section 8.4.
4.7 CONTINUING GUARANTEE.
The guarantee in this Section 4 is a continuing guarantee, and shall apply
to all Credit Party Obligations whenever arising.
SECTION 5
CONDITIONS
5.1 CLOSING CONDITIONS.
The obligation of the Lenders to enter into this Credit Agreement and to
make the initial Loans or the Issuing Lender to issue the initial Letter of
Credit, whichever shall occur first, shall be subject to satisfaction of the
following conditions (in form and substance acceptable to the Lenders):
(a) EXECUTED CREDIT DOCUMENTS. Receipt by the Agent of duly
executed copies of: (i) this Credit Agreement; (ii) the Notes; (iii) the
Collateral Documents and (iv) all other Credit Documents, each in form
and substance acceptable to the Lenders in their sole discretion.
(b) CORPORATE DOCUMENTS. Receipt by the Agent of the following:
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(i) CHARTER DOCUMENTS. Copies of the articles or
certificates of incorporation or other charter documents of each
Credit Party certified to be true and complete as of a recent date
by the appropriate Governmental Authority of the state or other
jurisdiction of its incorporation and certified by a secretary or
assistant secretary of such Credit Party to be true and correct as
of the Closing Date.
(ii) BYLAWS. A copy of the bylaws of each Credit Party
certified by a secretary or assistant secretary of such Credit Party
to be true and correct as of the Closing Date.
(iii) RESOLUTIONS. Copies of resolutions of the Board of
Directors of each Credit Party approving and adopting the Credit
Documents to which it is a party, the transactions contemplated
therein and authorizing execution and delivery thereof, certified by
a secretary or assistant secretary of such Credit Party to be true
and correct and in force and effect as of the Closing Date.
(iv) GOOD STANDING. Copies of (A) certificates of good
standing, existence or its equivalent with respect to each Credit
Party certified as of a recent date by the appropriate Governmental
Authorities of the state or other jurisdiction of incorporation and
each other jurisdiction in which the failure to so qualify and be in
good standing could have a Material Adverse Effect and (B) to the
extent available, a certificate indicating payment of all corporate
franchise taxes certified as of a recent date by the appropriate
governmental taxing authorities.
(v) INCUMBENCY. An incumbency certificate of each Credit
Party certified by a secretary or assistant secretary to be true and
correct as of the Closing Date.
(c) FINANCIAL STATEMENTS. Receipt by the Agent and the Lenders of
(i) the consolidated and consolidating financial statements of the
Borrower and its Subsidiaries, including balance sheets and income and
cash flow statements for the fiscal quarter ended March 31, 1998, (ii)
satisfactory projections including balance sheets and income and cash flow
statements for each twelve month period through December 31, 2004 and
(iii) such other information relating to the Borrower and its Subsidiaries
as the Agent may reasonably require in connection with the structuring and
syndication of credit facilities of the type described herein.
(d) OPINIONS OF COUNSThe Agent shall have received favorable
opinions dated as of the Closing Date of counsel to the Credit Parties
addressed to the Lenders with respect to the Credit Parties, the Credit
Documents and such other matters as the Lenders shall request.
(e) ENVIRONMENTAL REPORTS. Receipt by the Agent in form and
substance satisfactory to it of environmental assessment reports and
related documents of a recent date with respect to all Real Properties and
all other material real property owned or leased by a Consolidated Party.
(f) PERSONAL PROPERTY COLLATERAL. The Agent shall have received:
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(i) searches of Uniform Commercial Code filings in the
jurisdiction of the chief executive office of each Credit Party and
each jurisdiction where any Collateral is located or where a filing
would need to be made in order to perfect the Agent's security
interest in the Collateral, copies of the financing statements on
file in such jurisdictions and evidence that no Liens exist other
than Permitted Liens;
(ii) duly executed UCC financing statements for each appropriate
jurisdiction as is necessary, in the Agent's sole discretion, to
perfect the Agent's security interest in the Collateral;
(iii) searches of ownership of intellectual property in the
appropriate governmental offices and such patent/trademark/copyright
filings as requested by the Agent in order to perfect the Agent's
security interest in the Collateral;
(iv) all stock certificates evidencing the Capital Stock pledged
to the Agent pursuant to the Pledge Agreement, together with duly
executed in blank undated stock powers attached thereto (unless,
with respect to the pledged Capital Stock of any Foreign Subsidiary,
such stock powers are deemed unnecessary by the Agent in its
reasonable discretion under the law of the jurisdiction of
incorporation of such Person);
(v) such patent/trademark/copyright filings as requested by
the Agent in order to perfect the Agent's security interest in the
Collateral;
(vi) all instruments and chattel paper in the possession of any
of the Credit Parties, together with allonges or assignments as may
be necessary or appropriate to perfect the Agent's security interest
in the Collateral; and
(vii) duly executed consents as are necessary, in the Agent's sole
discretion, to perfect the Lenders' security interest in the
Collateral.
(g) REAL PROPERTY COLLATERAL. The Agent shall have received, in
form and substance reasonably satisfactory to the Agent:
(i) fully executed and notarized mortgages, deeds of trust
or deeds to secure debt (each, as the same may be amended, modified,
restated or supplemented from time to time, a "MORTGAGE INSTRUMENT"
and collectively the "MORTGAGE INSTRUMENTS") encumbering the fee
interest and/or leasehold interest of any Credit Party (to the
extent deemed material by the Agent) in each real property asset
designated in SCHEDULE 6.19(a) (each a "MORTGAGED PROPERTY" and
collectively the "MORTGAGED REAL Properties");
(ii) a title report obtained by the Credit Parties to the
extent deemed necessary by the Agent) in respect of each of the
Mortgaged Properties;
(iii) in the case of each material real property leasehold
interest of any Credit Party constituting Mortgaged Property, (a)
such estoppel letters, consents and waivers
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from the landlords on such real property as may be required by the
Agent, which estoppel letters shall be in the form and substance
reasonably satisfactory to the Agent and (b) evidence that the
applicable lease, a memorandum of lease with respect thereto, or
other evidence of such lease in form and substance reasonably
satisfactory to the Agent, has been or will be recorded in all
places to the extent necessary or desirable, in the reasonable
judgment of the Agent, so as to enable the Mortgage Instrument
encumbering such leasehold interest to effectively create a valid
and enforceable first priority lien (subject to Permitted Liens) on
such leasehold interest in favor of the Agent (or such other Person
as may be required or desired under local law) for the benefit of
Lenders;
(iv) the Agent shall have received, and the title insurance
company issuing the policy referred to in Section 5.1(i) (the "TITLE
INSURANCE COMPANY") shall have received, maps or plats of an
as-built survey of the sites of the real property covered by the
Mortgage Instruments certified to the Agent and the Title Insurance
Company in a manner reasonably satisfactory to each of the agent and
the Title Insurance Company, dated a date reasonably satisfactory to
the Agent and the Title Insurance Company by an independent
professional licensed land surveyor, which maps or plats and the
surveys on which they are based shall be made in accordance with
standards that enable the Title Insurance Company to issue the
policies referred to in Section 5.1(i)(v) below without exception
for "Survey matters", except for matters as are reasonably
acceptable to the Agent;
(v) ALTA mortgagee title insurance policies issued by First
American Title Insurance Company (the "MORTGAGE POLICIES"), in
amounts not less than the respective amounts designated in SCHEDULE
6.19(a) with respect to any particular Mortgaged Property, assuring
the Agent that each of the Mortgage Instruments creates a valid and
enforceable first priority mortgage lien on the applicable Mortgaged
Property, free and clear of all defects and encumbrances except
Permitted Liens, which Mortgage Policies shall be in form and
substance reasonably satisfactory to the Agent and shall provide for
affirmative insurance and such reinsurance as the Agent may
reasonably request, all of the foregoing in form and substance
reasonably satisfactory to the Agent;
(vi) Evidence, which may be in the form of a letter from an
insurance broker or a municipal engineer or certified on a survey,
as to whether (a) any Mortgaged Property (an "FLOOD HAZARD
Property") is in an area designated by the Federal Emergency
Management Agency as having special flood or mud slide hazards and
(b) the community in which such Flood Hazard Property is located is
participating in the National Flood Insurance Program;
(vii) If there are any Flood Hazard Properties, a Credit
Party's written acknowledgment of receipt of written notification
from the Agent (a) as to the existence of each such Flood Hazard
Property and (b) as to whether the community in which each such
Flood Hazard Property is located is participating in the National
Flood Insurance Program;
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(viii) If there are maps or plats of an as-built survey of the
sites of the Mortgaged Properties certified to the Agent and the
Title Insurance Company in a manner reasonably satisfactory to them,
dated a date satisfactory to the Agent and the Title Insurance
Company by an independent professional licensed land surveyor
reasonably satisfactory to the Agent and the Title Insurance
Company, which maps or plats and the surveys on which they are based
shall be sufficient to delete any standard printed survey exception
contained in the applicable title policy and be made in accordance
with the Minimum Standard Detail Requirements for Land Title Surveys
jointly established and adopted by the American Land Title
Association and the American Congress on Surveying and Mapping in
1992 or 1997, and, without limiting the generality of the foregoing,
there shall be surveyed and shown on such maps, plats or surveys the
following: (A) the locations on such sites of all the buildings,
structures and other improvements and the established building
setback lines; (B) the lines of streets abutting the sites and width
thereof; (C) all access and other easements appurtenant to the sites
necessary to use the sites; (D) all roadways, paths, driveways,
easements, encroachments and overhanging projections and similar
encumbrances affecting the site, whether recorded, apparent from a
physical inspection of the sites or otherwise known to the surveyor;
(E) any encroachments on any adjoining property by the building
structures and improvements on the sites; and (F) if the site is
described as being on a filed map, a legend relating the survey to
said map; and
(ix) Evidence reasonably satisfactory to the Agent that each
of the Mortgaged Properties, and the uses of the Mortgaged
Properties, are in compliance in all material respects with all
applicable laws, regulations and ordinances including without
limitation health and environmental protection laws.
(h) PRIORITY OF LIENS. The Agent shall have received satisfactory
evidence that (i) the Agent, on behalf of the Lenders, holds a perfected,
first priority Lien on all Collateral and (ii) none of the Collateral is
subject to any other Liens other than Permitted Liens.
(i) EVIDENCE OF INSURANCE. Receipt by the Agent of copies of
insurance policies or certificates of insurance of the Consolidated
Parties evidencing liability and casualty insurance meeting the
requirements set forth in the Credit Documents, including, but not limited
to, naming the Agent as sole loss payee on behalf of the Lenders.
(j) CORPORATE STRUCTURE. The corporate capital and ownership
structure of the Consolidated Parties shall be as described in SCHEDULE
5.1(j).
(k) GOVERNMENT CONSENT. Receipt by the Agent of evidence that all
governmental, shareholder and material third party consents and approvals
necessary or desirable in connection with the related financings and other
transactions contemplated hereby have been obtained.
(l) MATERIAL ADVERSE EFFECT. No material adverse change shall have
occurred since December 27, 1997 in the condition (financial or
otherwise), business, management or prospects of the Consolidated Parties
taken as a whole.
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(m) LITIGATION. There shall not exist any pending or threatened
action, suit, investigation or proceeding against a Consolidated Party
that could reasonably be expected to have a Material Adverse Effect.
(n) SUBORDINATED NOTES. The Borrower shall have received not less
than $100,000,000 in cash proceeds from the issuance of unsecured senior
subordinated notes which shall have a maturity of not less than ten years
from the date of closing and which shall be otherwise on terms and
conditions acceptable to the Agent.
(o) EQUITY CONTRIBUTION. The Borrower shall have received new cash
equity in the amount of at least $18,500,000 (with total equity (which
shall include new equity plus the value of retained shares) to be in an
amount not less than $35,000,000) and shall have made all payments in
connection with the Related Transactions in an aggregate amount not to
exceed $59,100,000.
(p) OTHER INDEBTEDNESS. Receipt by the Agent of evidence that the
Consolidated Parties shall have no Funded Indebtedness other than the
Indebtedness under the Credit Documents and the Subordinated Notes.
(q) OFFICER'S CERTIFICATES. The Agent shall have received a
certificate or certificates executed by a Responsible Officer of the
Borrower as of the Closing Date stating that (i) all governmental,
shareholder and third party consents and approvals, if any, with respect
to the Credit Documents and the transactions contemplated thereby have
been obtained, (ii) each Consolidated Party is in compliance with all
existing financial obligations, (iii) no action, suit, investigation or
proceeding is pending or threatened in any court or before any arbitrator
or governmental instrumentality that purports to affect any Consolidated
Party or any transaction contemplated by the Credit Documents, if such
action, suit, investigation or proceeding would reasonably be expected to
have a Material Adverse Effect, and (iv) immediately after giving effect
to this Credit Agreement, the other Credit Documents and all the
transactions contemplated therein to occur on such date, (A) each of the
Credit Parties is Solvent, (B) no Default or Event of Default exists, (C)
all representations and warranties contained herein and in the other
Credit Documents are true and correct in all material respects, and (D)
the Credit Parties are in compliance with each of the financial covenants
set forth in Section 7.11.
(r) EXISTING CREDIT AGREEMENT. The Agent shall have received
satisfactory evidence that the Existing Credit Agreement has been
terminated.
(s) FEES AND EXPENSES. Payment by the Credit Parties of all fees and
expenses owed by them to the Lenders and the Agent, including, without
limitation, payment to the Agent of the fees set forth in the Fee Letter.
(t) OTHER. Receipt by the Lenders of such other documents,
instruments, agreements or information as reasonably requested by any
Lender, including, but not limited to, information regarding litigation,
tax, accounting, labor, insurance, pension liabilities (actual or
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contingent), real estate leases, material contracts, debt agreements,
property ownership and contingent liabilities of the Consolidated Parties.
5.2 CONDITIONS TO ALL EXTENSIONS OF CREDIT.
The obligations of each Lender to make, convert or extend any Loan and of
the Issuing Lender to issue or extend any Letter of Credit (including the
initial Loans and the initial Letter of Credit) are subject to satisfaction of
the following conditions in addition to satisfaction on the Closing Date of the
conditions set forth in Section 5.1:
(a) The Borrower shall have delivered (i) in the case of any
Revolving Loan, an appropriate Notice of Borrowing or Notice of
Extension/Conversion or (ii) in the case of any Letter of Credit, the
Issuing Lender shall have received an appropriate request for issuance in
accordance with the provisions of Section 2.2(b);
(b) The representations and warranties set forth in Section 6 shall,
subject to the limitations set forth therein, be true and correct in all
material respects as of such date (except for those which expressly relate
to an earlier date);
(c) There shall not have been commenced against any Credit Party an
involuntary case under any applicable bankruptcy, insolvency or other
similar law now or hereafter in effect, or any case, proceeding or other
action for the appointment of a receiver, liquidator, assignee, custodian,
trustee, sequestrator (or similar official) of such Person or for any
substantial part of its Property or for the winding up or liquidation of
its affairs, and such involuntary case or other case, proceeding or other
action shall remain undismissed, undischarged or unbonded;
(d) No Default or Event of Default shall have occurred and be
continuing either prior to or after giving effect thereto;
(e) No material adverse change shall have occurred since December
27, 1997 financial or otherwise), business, management or prospects of the
Consolidated Parties taken as a whole; and
(f) Immediately after giving effect to the making of such Loan (and
the application of the proceeds thereof) or to the issuance of such Letter
of Credit, as the case may be, (i) the sum of the aggregate principal
amount of outstanding Revolving Loans PLUS LOC Obligations outstanding
shall not exceed the Revolving Committed Amount, and (ii) the LOC
Obligations shall not exceed the LOC Committed Amount.
The delivery of each Notice of Borrowing, each Notice of Extension/Conversion
and each request for a Letter of Credit pursuant to Section 2.2(b) shall
constitute a representation and warranty by the Borrower of the correctness of
the matters specified in subsections (b), (c), (d), (e) and (f) above.
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SECTION 6
REPRESENTATIONS AND WARRANTIES
The Credit Parties hereby represent to the Agent and each Lender that:
6.1 FINANCIAL CONDITION.
(a) The audited consolidated balance sheet of the Consolidated
Parties as of December 27, 1997 and the audited consolidated statements of
earnings and statements of cash flows for the years ended December 31,
1996 and December 31, 1995 and the reviewed statements of earnings and
statements of cash flows for the three month period ended March 31, 1998
have heretofore been furnished to each Lender. Such audited financial
statements (including the notes thereto) (i) have been audited by Arthur
Andersen, L.L.P., (ii) have been prepared in accordance with GAAP
consistently applied throughout the periods covered thereby and (iii)
present fairly (on the basis disclosed in the footnotes to such financial
statements) in all material respects the consolidated financial condition,
results of operations and cash flows of the Consolidated Parties as of
such date and for such periods. The unaudited interim balance sheets of
the Consolidated Parties as at the end of, and the related unaudited
interim statements of earnings and of cash flows for, each fiscal month
and quarterly period ended after December 31, 1997 and prior to the
Closing Date (other than the month and quarterly period ending June 30,
1998) have heretofore been furnished to each Lender. Such interim
financial statements for each such quarterly period, (i) have been
prepared in accordance with GAAP consistently applied throughout the
periods covered thereby (subject to the absence of footnotes and changes
resulting from audit and normal year-end audit adjustments) and (ii)
present fairly (on the basis disclosed in the footnotes to such financial
statements) in all material respects the consolidated financial condition,
results of operations and cash flows of the Consolidated Parties as of
such date and for such periods. During the period from December 31, 1997
to and including the Closing Date, there has been no sale, transfer or
other disposition by any Consolidated Party of any material part of the
business or property of the Consolidated Parties, taken as a whole, and no
purchase or other acquisition by any of them of any business or property
(including any capital stock of any other person) material in relation to
the consolidated financial condition of the Consolidated Parties, taken as
a whole, in each case, which, is not reflected in the foregoing financial
statements or in the notes thereto and has not otherwise been disclosed in
writing to the Lenders on or prior to the Closing Date.
(b) The financial statements delivered to the Lenders pursuant to
Section 7.1(a), (i) have been prepared in accordance with GAAP (except as
may otherwise be permitted under Section 7.1(a)) and (ii) present fairly
(on the basis disclosed in the footnotes to such financial statements) in
all material respects the consolidated financial condition, results of
operations and cash flows of the Consolidated Parties as of such date and
for such periods.
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6.2 NO MATERIAL CHANGE.
Since December 27, 1997, (a) there has been no development or event
relating to or affecting a Consolidated Party which has had or would reasonably
be expected to have a Material Adverse Effect and (b) except as otherwise
permitted under this Credit Agreement, no dividends or other distributions have
been declared, paid or made upon the Capital Stock in a Consolidated Party nor
has any of the Capital Stock in a Consolidated Party been redeemed, retired,
purchased or otherwise acquired for value.
6.3 ORGANIZATION AND GOOD STANDING.
Each of the Consolidated Parties (a) is duly organized, validly existing
and is in good standing under the laws of the jurisdiction of its incorporation
or organization, (b) has the corporate or other necessary power and authority,
and the legal right, to own and operate its property, to lease the property it
operates as lessee and to conduct the business in which it is currently engaged
and (c) is duly qualified as a foreign entity and in good standing under the
laws of each jurisdiction where its ownership, lease or operation of property or
the conduct of its business requires such qualification, other than in such
jurisdictions where the failure to be so qualified and in good standing could
reasonably be expected to have a Material Adverse Effect.
6.4 POWER; AUTHORIZATION; ENFORCEABLE OBLIGATIONS.
Each of the Credit Parties has the corporate or other necessary power and
authority, and the legal right, to make, deliver and perform the Credit
Documents to which it is a party, and in the case of the Borrower, to obtain
extensions of credit hereunder, and has taken all necessary corporate action to
authorize the borrowings and other extensions of credit on the terms and
conditions of this Credit Agreement and to authorize the execution, delivery and
performance of the Credit Documents to which it is a party. No consent or
authorization of, filing with, notice to or other similar act by or in respect
of, any Governmental Authority or any other Person is required to be obtained or
made by or on behalf of any Credit Party in connection with the borrowings or
other extensions of credit hereunder or with the execution, delivery,
performance, validity or enforceability of the Credit Documents to which such
Credit Party is a party, except for (a) consents, authorizations, notices and
filings described in SCHEDULE 6.4, all of which have been obtained or made or
have the status described in such SCHEDULE 6.4 and (b) filings to perfect the
Liens created by the Collateral Documents. This Credit Agreement has been, and
each other Credit Document to which any Credit Party is a party will be, duly
executed and delivered on behalf of the Credit Parties. This Credit Agreement
constitutes, and each other Credit Document to which any Credit Party is a party
when executed and delivered will constitute, a legal, valid and binding
obligation of such Credit Party enforceable against such party in accordance
with its terms, except as enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the
enforcement of creditors' rights generally and by general equitable principles
(whether enforcement is sought by proceedings in equity or at law).
6.5 NO CONFLICTS.
Neither the execution and delivery of the Credit Documents, nor the
consummation of the transactions contemplated therein, nor performance of and
compliance with the terms and provisions
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thereof by such Credit Party will (a) violate or conflict with any provision of
its articles or certificate of incorporation or bylaws or other organizational
or governing documents of such Person, (b) violate, contravene or materially
conflict with any Requirement of Law or any other law, regulation (including,
without limitation, Regulation U or Regulation X), order, writ, judgment,
injunction, decree or permit applicable to it, (c) violate, contravene or
conflict with contractual provisions of, or cause an event of default under, any
indenture, loan agreement, mortgage, deed of trust, contract or other agreement
or instrument to which it is a party or by which it may be bound, the violation
of which would reasonably be expected to have a Material Adverse Effect, or (d)
result in or require the creation of any Lien (other than those contemplated in
or created in connection with the Credit Documents) upon or with respect to its
properties.
6.6 NO DEFAULT.
No Consolidated Party is in default in any respect under any contract,
lease, loan agreement, indenture, mortgage, security agreement or other
agreement or obligation to which it is a party or by which any of its properties
is bound which default could reasonably be expected to have a Material Adverse
Effect. No Default or Event of Default has occurred or exists except as
previously disclosed in writing to the Lenders.
6.7 OWNERSHIP.
Each Consolidated Party is the owner of, and has good and marketable title
to, all of its respective assets and none of such assets is subject to any Lien
other than Permitted Liens.
6.8 INDEBTEDNESS.
Except as otherwise permitted under Section 8.1, the Consolidated Parties
have no Indebtedness.
6.9 LITIGATION.
There are no actions, suits or legal, equitable, arbitration or
administrative proceedings, pending or, to the knowledge of any Credit Party,
threatened against any Consolidated Party which could reasonably be expected to
have a Material Adverse Effect. Set forth on SCHEDULE 6.9 is a listing of all
outstanding matters of litigation with respect to which any Consolidated Party
is involved. SCHEDULE 6.9 may be updated from time to time by the Borrower by
giving notice thereof to the Agent.
6.10 TAXES.
Each Consolidated Party has filed, or caused to be filed, all tax returns
(federal, state, local and foreign) required to be filed and paid (a) all
amounts of taxes shown thereon to be due (including interest and penalties) and
(b) all other taxes, fees, assessments and other governmental charges (including
mortgage recording taxes, documentary stamp taxes and intangibles taxes) owing
by it, except for such taxes (i) which are not yet delinquent or (ii) that are
being contested in good faith and by proper proceedings, and against which
adequate reserves are being maintained in accordance with
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GAAP. No Credit Party is aware as of the Closing Date of any proposed tax
assessments against it or any other Consolidated Party.
6.11 COMPLIANCE WITH LAW.
Each Consolidated Party is in compliance with all Requirements of Law and
all other laws, rules, regulations, orders and decrees (including without
limitation Environmental Laws) applicable to it, or to its properties, unless
such failure to comply could not be reasonably expected to have a Material
Adverse Effect. No Requirement of Law would be reasonably expected to cause a
Material Adverse Effect.
6.12 ERISA.
(a) During the five-year period prior to the date on which this
representation is made or deemed made: (i) no ERISA Event has occurred,
and, to the best knowledge of the Credit Parties, no event or condition
has occurred or exists as a result of which any ERISA Event could
reasonably be expected to occur, with respect to any Plan; (ii) no
"accumulated funding deficiency," as such term is defined in Section 302
of ERISA and Section 412 of the Code, whether or not waived, has occurred
with respect to any Plan; (iii) each Plan has been maintained, operated,
and funded in compliance with its own terms and in material compliance
with the provisions of ERISA, the Code, and any other applicable federal
or state laws; and (iv) no lien in favor of the PBGC or a Plan has arisen
or is reasonably likely to arise on account of any Plan.
(b) The actuarial present value of all "benefit liabilities" (as
defined in Section 4001(a)(16) of ERISA), whether or not vested, under
each Single Employer Plan, as of the last annual valuation date prior to
the date on which this representation is made or deemed made (determined,
in each case, utilizing the actuarial assumptions used in such Plan's most
recent actuarial valuation report), did not exceed as of such valuation
date the fair market value of the assets of such Plan.
(c) Neither any Consolidated Party nor any ERISA Affiliate has
incurred, or, to the best knowledge of the Credit Parties, could be
reasonably expected to incur, any withdrawal liability under ERISA to any
Multiemployer Plan or Multiple Employer Plan. Neither any Consolidated
Party nor any ERISA Affiliate would become subject to any withdrawal
liability under ERISA if any Consolidated Party or any ERISA Affiliate
were to withdraw completely from all Multiemployer Plans and Multiple
Employer Plans as of the valuation date most closely preceding the date on
which this representation is made or deemed made. Neither any Consolidated
Party nor any ERISA Affiliate has received any notification that any
Multiemployer Plan is in reorganization (within the meaning of Section
4241 of ERISA), is insolvent (within the meaning of Section 4245 of
ERISA), or has been terminated (within the meaning of Title IV of ERISA),
and no Multiemployer Plan is, to the best knowledge of the Credit Parties,
reasonably expected to be in reorganization, insolvent, or terminated.
(d) No prohibited transaction (within the meaning of Section 406 of
ERISA or Section 4975 of the Code) or breach of fiduciary responsibility
has occurred with respect to a
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Plan which has subjected or may subject any Consolidated Party or any
ERISA Affiliate to any liability under Sections 406, 409, 502(i), or
502(l) of ERISA or Section 4975 of the Code, or under any agreement or
other instrument pursuant to which any Consolidated Party or any ERISA
Affiliate has agreed or is required to indemnify any person against any
such liability.
(e) Neither any Consolidated Party nor any ERISA Affiliates has any
material liability with respect to "expected post-retirement benefit
obligations" within the meaning of the Financial Accounting Standards
Board Statement 106.
6.13 SUBSIDIARIES.
Set forth on SCHEDULE 6.13 is a complete and accurate list of all
Subsidiaries of each Consolidated Party. Information on SCHEDULE 6.13 includes
jurisdiction of incorporation, the number of shares of each class of Capital
Stock outstanding, the number and percentage of outstanding shares of each class
owned (directly or indirectly) by such Consolidated Party; and the number and
effect, if exercised, of all outstanding options, warrants, rights of conversion
or purchase and all other similar rights with respect thereto. The outstanding
Capital Stock of all such Subsidiaries is validly issued, fully paid and
non-assessable and is owned by each such Consolidated Party, directly or
indirectly, free and clear of all Liens (other than those arising under or
contemplated in connection with the Credit Documents). Other than as set forth
in SCHEDULE 6.13, no Consolidated Party has outstanding any securities
convertible into or exchangeable for its Capital Stock nor does any such Person
have outstanding any rights to subscribe for or to purchase or any options for
the purchase of, or any agreements providing for the issuance (contingent or
otherwise) of, or any calls, commitments or claims of any character relating to
its Capital Stock. SCHEDULE 6.13 may be updated from time to time by the
Borrower by giving written notice thereof to the Agent.
6.14 GOVERNMENTAL REGULATIONS, ETC.
(a) No part of the Letters of Credit or proceeds of the Loans will
be used, directly or indirectly, for the purpose of purchasing or carrying
any "margin stock" within the meaning of Regulation G or Regulation U, or
for the purpose of purchasing or carrying or trading in any securities. If
requested by any Lender or the Agent, the Borrower will furnish to the
Agent and each Lender a statement to the foregoing effect in conformity
with the requirements of FR Form U-1 referred to in Regulation U. No
indebtedness being reduced or retired out of the proceeds of the Loans was
or will be incurred for the purpose of purchasing or carrying any margin
stock within the meaning of Regulation U or any "margin security" within
the meaning of Regulation T. "Margin stock" within the meaning of
Regulation U does not constitute more than 25% of the value of the
consolidated assets of the Consolidated Parties. None of the transactions
contemplated by this Credit Agreement (including, without limitation, the
direct or indirect use of the proceeds of the Loans) will violate or
result in a violation of the Securities Act of 1933, as amended, or the
Securities Exchange Act of 1934, as amended, or regulations issued
pursuant thereto, or Regulation G, T, U or X.
(b) No Consolidated Party is subject to regulation under the Public
Utility Holding Company Act of 1935, the Federal Power Act or the
Investment Company Act of 1940, each as amended. In addition, no
Consolidated Party is (i) an "investment company" registered or
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required to be registered under the Investment Company Act of 1940, as
amended, and is not controlled by such a company, or (ii) a "holding
company", or a "subsidiary company" of a "holding company", or an
"affiliate" of a "holding company" or of a "subsidiary" of a "holding
company", within the meaning of the Public Utility Holding Company Act of
1935, as amended.
(c) No director, executive officer or principal shareholder of any
Consolidated Party is a director, executive officer or principal
shareholder of any Lender. For the purposes hereof the terms "director",
"executive officer" and "principal shareholder" (when used with reference
to any Lender) have the respective meanings assigned thereto in Regulation
O issued by the Board of Governors of the Federal Reserve System.
(d) Each Consolidated Party has obtained and holds in full force and
effect, all material franchises, licenses, permits, certificates,
authorizations, qualifications, accreditations, easements, rights of way
and other rights, consents and approvals which are necessary for the
ownership of its respective Property and to the conduct of its respective
businesses as presently conducted.
(e) No Consolidated Party is in violation of any applicable statute,
regulation or ordinance of the United States of America, or of any state,
city, town, municipality, county or any other jurisdiction, or of any
agency thereof (including without limitation, environmental laws and
regulations), which violation could reasonably be expected to have a
Material Adverse Effect.
(f) Each Consolidated Party is current with all material reports and
documents, if any, required to be filed with any state or federal
securities commission or similar agency and is in full compliance in all
material respects with all applicable rules and regulations of such
commissions.
6.15 PURPOSE OF LOANS AND LETTERS OF CREDIT.
The proceeds of the Loans hereunder shall be used solely by the Borrower
to (a) refinance existing Indebtedness and (b) provide for working capital and
for Permitted Acquisitions. The Letters of Credit shall be used only for or in
connection with appeal bonds, reimbursement obligations arising in connection
with surety and reclamation bonds, reinsurance, domestic or international trade
transactions and obligations not otherwise aforementioned relating to
transactions entered into by the applicable account party in the ordinary course
of business.
6.16 ENVIRONMENTAL MATTERS.
To the knowledge of each Credit Party, set forth on SCHEDULE 6.16 is a
listing of each environmental matter affecting any real property owned or leased
by any Consolidated Party. None of the items set forth on SCHEDULE 6.16 could
reasonably be expected to have a Material Adverse Effect. With respect to each
other real property owned or leased by any Consolidated Party:
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(a) Each of the facilities and properties owned, leased or operated
by the Consolidated Parties (the "PROPERTIES") and all operations at the
Properties are in compliance with all applicable Environmental Laws, and
there is no material violation of any Environmental Law with respect to
the Properties or the businesses operated by the Consolidated Parties (the
"BUSINESSES"), and to the knowledge of the Credit Parties there are no
conditions relating to the Businesses or Properties that could give rise
to a material liability under any applicable Environmental Laws.
(b) None of the Properties contains, or to the knowledge of the
Credit Parties has previously contained, any Materials of Environmental
Concern at, on or under the Properties in amounts or concentrations that
constitute or constituted a material violation of, or could give rise to a
material liability under, Environmental Laws.
(c) No Consolidated Party has received any written or verbal notice
of, or inquiry from any Governmental Authority regarding, any violation,
alleged violation, non-compliance, liability or potential liability
regarding environmental matters or compliance with Environmental Laws with
regard to any of the Properties or the Businesses, nor does any
Consolidated Party have knowledge or reason to believe that any such
notice will be received or is being threatened.
(d) Materials of Environmental Concern have not been transported or
disposed of from the Properties, or generated, treated, stored or disposed
of at, on or under any of the Properties or any other location, in each
case by or on behalf of any Consolidated Party in material violation of,
or in a manner that could reasonably be expected to give rise to liability
under, any applicable Environmental Law.
(e) No judicial proceeding or governmental or administrative action
is pending or, to the best knowledge of any Credit Party, threatened,
under any Environmental Law to which any Consolidated Party is or will be
named as a party, nor are there any consent decrees or other decrees,
consent orders, administrative orders or other orders, or other
administrative or judicial requirements outstanding under any
Environmental Law with respect to the Consolidated Parties, the Properties
or the Businesses.
(f) There has been no release or, threat of release of Materials of
Environmental Concern at or from the Properties, or arising from or
related to the operations (including, without limitation, disposal) of any
Consolidated Party in connection with the Properties or otherwise in
connection with the Businesses, in a material violation of or in amounts
or in a manner that could reasonably be expected to give rise to a
material liability under Environmental Laws.
6.17 INTELLECTUAL PROPERTY.
Each Consolidated Party owns, or has the legal right to use, all
trademarks, tradenames, copyrights, technology, know-how and processes (the
"INTELLECTUAL PROPERTY") necessary for each of them to conduct its business as
currently conducted except for those the failure to own or have such legal right
to use could not reasonably be expected to have a Material Adverse Effect. Set
forth on
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SCHEDULE 6.17 is a list of all Intellectual Property owned by each Consolidated
Party or that any Consolidated Party has the right to use. Except as provided on
SCHEDULE 6.17, no claim has been asserted and is pending by any Person
challenging or questioning the use of any such Intellectual Property or the
validity or effectiveness of any such Intellectual Property, nor does any Credit
Party know of any such claim, and to the Credit Parties' knowledge the use of
such Intellectual Property by any Consolidated Party does not infringe on the
rights of any Person, except for such claims and infringements that in the
aggregate, would not reasonably be expected to not have a Material Adverse
Effect. SCHEDULE 6.17 may be updated from time to time by the Borrower by giving
written notice thereof to the Agent.
6.18 SOLVENCY.
Each Credit Party is and, after consummation of the transactions
contemplated by this Credit Agreement will be Solvent.
6.19 INVESTMENTS.
All Investments of each Consolidated Party are Permitted Investments.
6.20 LOCATION OF COLLATERAL.
Set forth on SCHEDULE 6.20(a) is a list of all Mortgaged Properties with
street address, county and state where located. Set forth on SCHEDULE 6.20(b) is
a list of all locations where any tangible personal property of a Consolidated
Party is located, including county and state where located. Set forth on
SCHEDULE 6.20(c) is the chief executive office and principal place of business
of each Consolidated Party. SCHEDULE 6.20(a), 6.20(b) and 6.20(c) may be updated
from time to time by the Borrower giving written notice thereof to the Agent.
6.21 DISCLOSURE.
Neither this Credit Agreement nor any financial statements delivered to
the Lenders nor any other document, certificate or statement furnished to the
Lenders by or on behalf of any Consolidated Party in connection with the
transactions contemplated hereby contains any untrue statement of a material
fact or omits to state a material fact necessary in order to make the statements
contained therein or herein not misleading.
6.22 NO BURDENSOME RESTRICTIONS.
No Consolidated Party is a party to any agreement or instrument or subject
to any other obligation or any charter or corporate restriction or any provision
of any applicable law, rule or regulation which, individually or in the
aggregate, could reasonably be expected to have a Material Adverse Effect.
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6.23 BROKERS' FEES.
No Consolidated Party has any obligation to any Person in respect of any
finder's, broker's, investment banking or other similar fee in connection with
any of the transactions contemplated under the Credit Documents.
6.24 LABOR MATTERS.
Except as set forth on SCHEDULE 6.24, there are no collective bargaining
agreements or Multiemployer Plans covering the employees of a Consolidated Party
as of the Closing Date and none of the Consolidated Parties has suffered any
strikes, walkouts, work stoppages or other material labor difficulty within the
last five years.
6.25 NATURE OF BUSINESS.
As of the Closing Date, the Consolidated Parties are engaged in the
business of cutting tool manufacturing and distribution.
6.26 YEAR 2000 COMPLIANCE.
The Borrower has (i) initiated a review and assessment of all areas within
its and each of its Subsidiaries' business and operations that could be
adversely affected by the "Year 2000 Problem" (that is, the risk that computer
applications used by the Borrower or any of its Subsidiaries may be unable to
recognize and perform properly date-sensitive functions involving certain dates
prior to and any date after December 31, 1999), (ii) developed a plan and
timeline for addressing the Year 2000 Problem on a timely basis, and (iii) to
date, implemented that plan in accordance with such timetable. The Borrower
believes that all computer applications that are material to its or any of its
Subsidiaries' business and operations will on a timely basis be able to perform
properly date-sensitive functions for all dates before and after January 1, 2000
(that is, be "Year 2000 compliant"), except to the extent that a failure to do
so could not reasonably be expected to have Material Adverse Effect.
SECTION 7
AFFIRMATIVE COVENANTS
Each Credit Party hereby covenants and agrees that so long as this Credit
Agreement is in effect or any amounts payable hereunder or under any other
Credit Document shall remain outstanding, and until all of the Commitments
hereunder shall have terminated:
7.1 INFORMATION COVENANTS.
The Borrower will furnish, or cause to be furnished, to the Agent and each
of the Lenders:
(a) ANNUAL FINANCIAL STATEMENTS. As soon as available, and in any
event within 90 days after the close of each fiscal year of the
Consolidated Parties, (i) a consolidated balance
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sheet of the Consolidated Parties, as of the end of such fiscal year,
together with related consolidated statements of operations and
shareholders' equity and consolidated cash flows for such fiscal year,
setting forth in comparative form consolidated figures for the preceding
fiscal year, all such financial information described above to be in
reasonable form and detail and audited by independent certified public
accountants of recognized national standing reasonably acceptable to the
Agent and whose opinion shall be to the effect that such financial
statements have been prepared in accordance with GAAP (except for changes
with which such accountants concur) and shall not be limited as to the
scope of the audit or qualified as to the status of the Consolidated
Parties as a going concern and (ii) an unaudited consolidating balance
sheet and statement of operations of the Consolidated Parties, as of the
end of such fiscal year.
(b) QUARTERLY FINANCIAL STATEMENTS. As soon as available, and in any
event within 45 days after the close of each fiscal quarter of the
Consolidated Parties (other than the fourth fiscal quarter, in which case
90 days after the end thereof) a consolidated balance sheet of the
Consolidated Parties, as of the end of such fiscal quarter, together with
related consolidated statements of operations and shareholders' equity and
consolidated cash flows for such fiscal quarter in each case setting forth
in comparative form consolidated figures for the corresponding period of
the preceding fiscal year, all such financial information described above
to be in reasonable form and detail and reasonably acceptable to the
Agent, and accompanied by a certificate of a Responsible Officer to the
effect that such quarterly financial statements fairly present in all
material respects the financial condition of the Consolidated Parties and
have been prepared in accordance with GAAP, subject to the absence of
footnotes and changes resulting from audit and normal year-end audit
adjustments.
(c) MONTHLY FINANCIAL STATEMENTS. As soon as available, and in
any event within 30 days after the end of each month of the Consolidated
Parties, a copy of the Borrower's monthly management summary.
(d) OFFICER'S CERTIFICATE. At the time of delivery of the financial
statements provided for in Sections 7.1(a) and 7.1(b) above, a certificate
of a Responsible Officer substantially in the form of EXHIBIT 7.1(d), (i)
demonstrating, with respect to the annual and quarterly statements only,
compliance with the financial covenants contained in Section 7.11 by
calculation thereof as of the end of each such fiscal period and (ii)
stating that no Default or Event of Default exists, or if any Default or
Event of Default does exist, specifying the nature and extent thereof and
what action the Credit Parties propose to take with respect thereto.
(e) ANNUAL BUSINESS PLAN AND BUDGETS. Within 60 days after the end
of each fiscal year of the Borrower, beginning with the fiscal year ending
January 2, 1999 an annual business plan and budget of the Consolidated
Parties containing, among other things, pro forma financial statements for
the next fiscal year.
(f) COMPLIANCE WITH CERTAIN PROVISIONS OF THE CREDIT AGREEMENT.
Within 90 days after the end of each fiscal year of the Borrower, a
certificate containing information regarding the amount of all Asset
Dispositions that were made during the prior fiscal year.
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(g) ACCOUNTANT'S CERTIFICATE. Within the period for delivery of the
annual financial statements provided in Section 7.1(a), a report of the
accountants conducting the annual audit stating that they have reviewed
Sections 7.11, 8.1, 8.5, 8.6 and 8.7 of this Credit Agreement and stating
further whether, in the course of their audit, they have become aware of
any non-compliance with any of the terms, covenants, provisions or
conditions of Sections 7.11, 8.1, 8.5, 8.6 or 8.7 of this Credit Agreement
insofar as such non-compliance relates to accounting matters and, if any
such non-compliance exists, specifying the nature and extent thereof.
(h) AUDITOR'S REPORTS. Promptly upon receipt thereof, a copy of any
other report or "management letter" submitted by independent accountants
to any Consolidated Party in connection with any annual, interim or
special audit of the books of such Person.
(i) REPORTS. Promptly upon transmission or receipt thereof, (i)
copies of any filings and registrations with, and reports to or from, the
Securities and Exchange Commission, or any successor agency, and copies of
all financial statements, proxy statements, notices and reports as any
Consolidated Party shall send to its shareholders or to a holder of any
Indebtedness owed by any Consolidated Party in its capacity as such a
holder and (ii) upon the request of the Agent, all reports and written
information to and from the United States Environmental Protection Agency,
or any state or local agency responsible for environmental matters, the
United States Occupational Health and Safety Administration, or any state
or local agency responsible for health and safety matters, or any
successor agencies or authorities concerning environmental, health or
safety matters.
(j) NOTICES. Upon obtaining knowledge thereof, the Borrower will
give written notice to the Agent immediately of (i) the occurrence of an
event or condition consisting of a Default or Event of Default, specifying
the nature and existence thereof and what action the Credit Parties
propose to take with respect thereto, and (ii) the occurrence of any of
the following with respect to any Consolidated Party (A) the pendency or
commencement of any litigation, arbitral or governmental proceeding
against such Person which if adversely determined is likely to have a
Material Adverse Effect, (B) the institution of any proceedings against
such Person with respect to, or the receipt of notice by such Person of
potential liability or responsibility for violation, or alleged violation
of any federal, state or local law, rule or regulation, including but not
limited to, Environmental Laws, the violation of which could reasonably be
expected to have a Material Adverse Effect, or (C) any notice or
determination concerning the imposition of any withdrawal liability by a
Multiemployer Plan against such Person or any ERISA Affiliate, the
determination that a Multiemployer Plan is, or is expected to be, in
reorganization within the meaning of Title IV of ERISA or the termination
of any Plan.
(k) ERISA. Upon obtaining knowledge thereof, the Borrower will give
written notice to the Agent promptly (and in any event within five
business days) of: (i) of any event or condition, including, but not
limited to, any Reportable Event, that constitutes, or might reasonably
lead to, an ERISA Event; (ii) with respect to any Multiemployer Plan, the
receipt of notice as prescribed in ERISA or otherwise of any withdrawal
liability assessed against the Borrower or any of its ERISA Affiliates, or
of a determination that any Multiemployer Plan is in reorganization or
insolvent (both within the meaning of Title IV of ERISA); (iii) the
failure
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to make full payment on or before the due date (including extensions)
thereof of all amounts which any Consolidated Party or any ERISA Affiliate
is required to contribute to each Plan pursuant to its terms and as
required to meet the minimum funding standard set forth in ERISA and the
Code with respect thereto; or (iv) any change in the funding status of any
Plan that could have a Material Adverse Effect, together with a
description of any such event or condition or a copy of any such notice
and a statement by the chief financial officer of the Borrower briefly
setting forth the details regarding such event, condition, or notice, and
the action, if any, which has been or is being taken or is proposed to be
taken by the Credit Parties with respect thereto. Promptly upon request,
the Credit Parties shall furnish the Agent and the Lenders with such
additional information concerning any Plan as may be reasonably requested,
including, but not limited to, copies of each annual report/return (Form
5500 series), as well as all schedules and attachments thereto required to
be filed with the Department of Labor and/or the Internal Revenue Service
pursuant to ERISA and the Code, respectively, for each "plan year" (within
the meaning of Section 3(39) of ERISA).
(l) ENVIRONMENTAL.
(i) Upon the reasonable written request of the Agent (which
in any event, provided no Default or Event of Default shall have
occurred and be continuing, shall not exceed more than one time in
any 3 year period) the Credit Parties will furnish or cause to be
furnished to the Agent, at the Borrower's expense, a report of an
environmental assessment of reasonable scope, form and depth,
(including, where appropriate, invasive soil or groundwater
sampling) by a consultant reasonably acceptable to the Agent as to
the nature and extent of the presence of any Materials of
Environmental Concern on any Properties (as defined in Section 6.16)
and as to the compliance by any Consolidated Party with
Environmental Laws at such Properties. If the Credit Parties fail to
deliver such an environmental report within seventy-five (75) days
after receipt of such written request then the Agent may arrange for
same, and the Consolidated Parties hereby grant to the Agent and
their representatives access to the Properties to reasonably
undertake such an assessment (including, where appropriate, invasive
soil or groundwater sampling). The reasonable cost of any assessment
arranged for by the Agent pursuant to this provision will be payable
by the Borrower on demand and added to the obligations secured by
the Collateral Documents.
(ii) The Consolidated Parties will conduct and complete all
investigations, studies, sampling, and testing and all remedial,
removal, and other actions necessary to address all Materials of
Environmental Concern on, from or affecting any of the Properties to
the extent necessary to be in compliance with all Environmental Laws
and with the validly issued orders and directives of all
Governmental Authorities with jurisdiction over such Properties to
the extent any failure could reasonably be expected to have a
Material Adverse Effect.
(m) ADDITIONAL PATENTS AND TRADEMARKS. At the time of delivery of
the financial statements and reports provided for in Section 7.1(a), a
report signed by the chief financial officer or treasurer of the Borrower
setting forth (i) a list of registration numbers for all patents,
trademarks, service marks, tradenames and copyrights awarded to any
Consolidated Party since
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the last day of the immediately preceding fiscal year and (ii) a list of
all patent applications, trademark applications, service mark
applications, trade name applications and copyright applications submitted
by any Consolidated Party since the last day of the immediately preceding
fiscal year and the status of each such application, all in such form as
shall be reasonably satisfactory to the Agent.
(n) OTHER INFORMATION. With reasonable promptness upon any such
request, such other information regarding the business, properties or
financial condition of any Consolidated Party as the Agent or the Required
Lenders may reasonably request.
7.2 PRESERVATION OF EXISTENCE AND FRANCHISES.
Except as a result of or in connection with a dissolution, merger or
disposition of a Subsidiary permitted under Section 8.4 or Section 8.5, each
Credit Party will, and will cause each of its Subsidiaries to, do all things
necessary to preserve and keep in full force and effect its existence, rights,
franchises and authority.
7.3 BOOKS AND RECORDS.
Each Credit Party will, and will cause each of its Subsidiaries to, keep
complete and accurate books and records of its transactions in accordance with
good accounting practices on the basis of GAAP (including the establishment and
maintenance of appropriate reserves).
7.4 COMPLIANCE WITH LAW.
Each Credit Party will, and will cause each of its Subsidiaries to, comply
with all laws, rules, regulations and orders, and all applicable restrictions
imposed by all Governmental Authorities, applicable to it and its Property if
noncompliance with any such law, rule, regulation, order or restriction could
reasonably be expected to have a Material Adverse Effect.
7.5 PAYMENT OF TAXES AND OTHER INDEBTEDNESS.
Each Credit Party will, and will cause each of its Subsidiaries to, pay
and discharge (a) all taxes, assessments and governmental charges or levies
imposed upon it, or upon its income or profits, or upon any of its properties,
before they shall become delinquent, (b) all lawful claims (including claims for
labor, materials and supplies) which, if unpaid, might give rise to a Lien upon
any of its properties, and (c) except as prohibited hereunder, all of its other
Indebtedness as it shall become due; PROVIDED, HOWEVER, that no Consolidated
Party shall be required to pay any such tax, assessment, charge, levy, claim or
Indebtedness which is being contested in good faith by appropriate proceedings
and as to which adequate reserves therefor have been established in accordance
with GAAP, unless the failure to make any such payment (i) could give rise to an
immediate right to foreclose on a Lien securing such amounts or (ii) could
reasonably be expected to have a Material Adverse Effect.
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7.6 INSURANCE.
Each Credit Party will, and will cause each of its Subsidiaries to, at all
times maintain in full force and effect insurance (including worker's
compensation insurance, liability insurance, casualty insurance and business
interruption insurance) in such amounts, covering such risks and liabilities and
with such deductibles or self-insurance retentions as are in accordance with
normal industry practice (or as otherwise required by the Collateral Documents).
The Agent shall be named as loss payee or mortgagee, as its interest may appear,
and/or additional insured with respect to any such insurance providing coverage
in respect of any Collateral, and each provider of any such insurance shall
agree, by endorsement upon the policy or policies issued by it or by independent
instruments furnished to the Agent, that it will give the Agent thirty (30) days
prior written notice before any such policy or policies shall be altered or
canceled, and that no act or default of any Consolidated Party or any other
Person shall affect the rights of the Agent under such policy or policies. The
present insurance coverage of the Consolidated Parties is outlined as to
carrier, policy number, expiration date, type and amount on SCHEDULE 7.6.
In case of any material loss, damage to or destruction of the Collateral
of any Credit Party or any part thereof, such Credit Party shall promptly give
written notice thereof to the Agent generally describing the nature and extent
of such damage or destruction. In case of any loss, damage to or destruction of
the Collateral of any Credit Party or any part thereof, such Credit Party,
whether or not the insurance proceeds, if any, received on account of such
damage or destruction shall be sufficient for that purpose, at such Credit
Party's cost and expense, will promptly repair or replace the Collateral of such
Credit Party so lost, damaged or destroyed; PROVIDED, HOWEVER, that such Credit
Party need not repair or replace the Collateral of such Credit Party so lost,
damaged or destroyed to the extent that (i) the failure to make such repair or
replacement is desirable to the proper conduct of the business of such Credit
Party in the ordinary course and otherwise in the best interest of such Credit
Party and (ii) the value of such insurance proceeds received by the Borrower
shall not exceed $250,000 in the aggregate.
7.7 MAINTENANCE OF PROPERTY.
Each Credit Party will, and will cause each of its Subsidiaries to,
maintain and preserve its properties and equipment material to the conduct of
its business in good repair, working order and condition, normal wear and tear
and casualty and condemnation excepted, and will make, or cause to be made, to
such properties and equipment from time to time all repairs, renewals,
replacements, extensions, additions, betterments and improvements thereto as may
be needed or proper, to the extent and in the manner customary for companies in
similar businesses.
7.8 PERFORMANCE OF OBLIGATIONS.
Each Credit Party will, and will cause each of its Subsidiaries to,
perform in all material respects all of its obligations under the terms of all
material agreements, indentures, mortgages, security agreements or other debt
instruments to which it is a party or by which it is bound.
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7.9 USE OF PROCEEDS.
The Borrower will use the proceeds of the Loans and will use the Letters
of Credit solely for the purposes set forth in Section 6.15.
7.10 AUDITS/INSPECTIONS.
Upon reasonable notice and during normal business hours, each Credit Party
will, and will cause each of its Subsidiaries to, permit representatives
appointed by the Agent, including, without limitation, independent accountants,
agents, attorneys, and appraisers to visit and inspect its property, including
its books and records, its accounts receivable and inventory, its facilities and
its other business assets, and to make photocopies or photographs thereof and to
write down and record any information such representative obtains and shall
permit the Agent or its representatives to investigate and verify the accuracy
of information provided to the Lenders and to discuss all such matters with the
officers, employees and representatives of such Person. The Credit Parties agree
that the Agent, and its representatives, may conduct an annual audit of the
Collateral, at the expense of the Borrower, provided that such expense shall not
be in excess of $5000 annually.
7.11 FINANCIAL COVENANTS.
(a) FIXED CHARGE COVERAGE RATIO. The Fixed Charge Coverage Ratio, as
of the last day of each fiscal quarter of the Consolidated Parties for
each date of determination occurring during each of the periods listed
below, shall be greater than or equal to:
Period Ratio
------ -----
Closing Date through December 31, 1999 1.00 to 1.0
January 1, 2000 and thereafter 1.10 to 1.0
(b) NET LEVERAGE RATIO. The Net Leverage Ratio, as of the last day
of each fiscal quarter of the Consolidated Parties, for each date of
determination occurring during each of the periods listed below, shall be
less than or equal to:
Period Ratio
------ -----
Closing Date through December 31, 1998 5.50 to 1.0
January 1, 1999 through December 31, 1999 5.00 to 1.0
January 1, 2000 and thereafter 4.75 to 1.0
(c) INTEREST COVERAGE RATIO. The Interest Coverage Ratio, as of the
last day of each fiscal quarter of the Consolidated Parties for each date
of determination occurring during each of the periods listed below, shall
be greater than or equal to:
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Period Ratio
------ -----
Closing Date through December 31, 1998 1.50 to 1.0
January 1, 1999 through December 31, 1999 1.65 to 1.0
January 1, 2000 and thereafter 1.80 to 1.0
(d) MAXIMUM BORROWING AMOUNT. The aggregate amount of outstanding
Revolving Loans PLUS LOC Obligations outstanding as of the last day of
each fiscal quarter of the Consolidated Parties shall not exceed the
Maximum Borrowing Amount.
7.12 ADDITIONAL CREDIT PARTIES.
As soon as practicable and in any event within 60 days after any Person
becomes a Subsidiary of any Credit Party, the Borrower shall provide the Agent
with written notice thereof setting forth information in reasonable detail
describing all of the assets of such Person and shall (a) if such Person is a
Domestic Subsidiary of a Credit Party, cause such Person to execute a Joinder
Agreement in substantially the same form as EXHIBIT 7.12, (b) cause 100% (if
such Person is a Domestic Subsidiary of a Credit Party) or 65% (if such Person
is a direct Foreign Subsidiary of a Credit Party) of the Capital Stock of such
Person to be delivered to the Agent (together with undated stock powers signed
in blank (unless, with respect to a Foreign Subsidiary, such stock powers are
deemed unnecessary by the Agent in its reasonable discretion under the law of
the jurisdiction of incorporation of such Person)) and pledged to the Agent
pursuant to an appropriate pledge agreement(s) in substantially the form of the
Pledge Agreement and otherwise in form acceptable to the Agent and (c) cause
such Person to (i) if such Person owns or leases any real property located in
the United States of America or deemed to be material by the Agent or the
Required Lenders in its or their sole reasonable discretion, deliver to the
Agent with respect to such real property documents, instruments and other items
of the types required to be delivered by the Agent all in form, content and
scope reasonably satisfactory to the Agent and (ii) deliver such other
documentation as the Agent may reasonably request in connection with the
foregoing, including, without limitation, appropriate UCC-1 financing
statements, real estate title insurance policies, environmental reports,
landlord's waivers, certified resolutions and other organizational and
authorizing documents of such Person, favorable opinions of counsel to such
Person (which shall cover, among other things, the legality, validity, binding
effect and enforceability of the documentation referred to above and the
perfection of the Agent's liens thereunder) and other items of the types
required to be delivered pursuant to Section 5.1(e), all in form, content and
scope reasonably satisfactory to the Agent.
7.13 PLEDGED ASSETS.
Each Credit Party will, and will cause each of its Subsidiaries to, cause
(a) all of its owned personal property located in the United States and (b) to
the extent deemed to be material by the Agent or the Required Lenders in its or
their sole reasonable discretion, all of its other owned personal property, to
be subject at all times to first priority, perfected Liens in favor of the Agent
pursuant to the terms and conditions of the Collateral Documents or, with
respect to any such property acquired subsequent to the Closing Date, such other
additional security documents as the Agent shall reasonably request. In
furtherance of the foregoing terms of this Section 7.13, the Borrower agrees to
promptly provide the Agent with written notice of the acquisition by, or the
entering into a lease by, any Credit Party of any asset(s) having a market value
greater than $500,000, setting forth in reasonable detail the
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location and a description of the asset(s) so acquired. Without limiting the
generality of the above, the Credit Parties will cause 100% of the Capital Stock
or other equity interest in each of their direct or indirect Domestic
Subsidiaries and 65% of the Capital Stock or other equity interest in each of
their direct Foreign Subsidiaries to be subject at all times to a first
priority, perfected Lien in favor of the Agent pursuant to the terms and
conditions of the Collateral Documents or such other security documents as the
Agent shall reasonably request.
If, subsequent to the Closing Date, a Credit Party shall acquire any
intellectual property, securities, instruments, chattel paper or other personal
property required to be delivered to the Agent as Collateral hereunder or under
any of the Collateral Documents, the Borrower shall promptly (and in any event
within five (5) Business Days) after any responsible officer of a Credit Party
acquires knowledge of same notify the Agent of same.
7.14 YEAR 2000 COMPLIANCE.
The Borrower will promptly notify the Agent in the event that the
Borrower discovers or determines that any computer application that is material
to its or any of its Subsidiaries business and operations will not be Year 2000
compliant (as such term is defined in Section 6.25), except to the extent that
such failure could not reasonably be expected to have a Material Adverse Effect.
SECTION 8
NEGATIVE COVENANTS
Each Credit Party hereby covenants and agrees that, so long as this Credit
Agreement is in effect or any amounts payable hereunder or under any other
Credit Document shall remain outstanding, and until all of the Commitments
hereunder shall have terminated:
8.1 INDEBTEDNESS.
The Credit Parties will not permit any Consolidated Party to contract,
create, incur, assume or permit to exist any Indebtedness, except:
(a) Indebtedness arising under this Credit Agreement and the
other Credit Documents;
(b) Indebtedness of the Borrower and its Subsidiaries set forth in
SCHEDULE 8.1 (and renewals, refinancings and extensions thereof on terms
and conditions not materially less favorable to the Borrower or its
Subsidiaries, as applicable, than such existing Indebtedness);
(c) purchase money Indebtedness (including Capital Leases) hereafter
incurred by the Borrower or any of its Subsidiaries to finance the
purchase of fixed assets PROVIDED that (i) the total of all such
Indebtedness for all such Persons taken together shall not exceed an
aggregate principal amount of $4,000,000 at any one time (including any
such Indebtedness referred to in subsection (b) above); (ii) such
Indebtedness when incurred shall not exceed the purchase price of
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the asset(s) financed; and (iii) no such Indebtedness shall be refinanced
for a principal amount in excess of the principal balance outstanding
thereon at the time of such refinancing;
(d) obligations of the Borrower or any of its Subsidiaries in
respect of Hedging Agreements entered into in order to manage existing or
anticipated interest rate or exchange rate risks and not for speculative
purposes;
(e) intercompany Indebtedness arising out of loans and advances
permitted under Section 8.6;
(f) Indebtedness in respect of the Subordinated Notes;
(g) Indebtedness of Foreign Subsidiaries so long as, with respect to
each such Foreign Subsidiary, such Indebtedness does not exceed the sum of
(i) 85% of such Foreign Subsidiary's accounts receivable plus (ii) 60% of
such Foreign Subsidiary's inventory; provided, however, upon notice to the
Agent, any Foreign Subsidiary may incur additional Indebtedness in excess
of the amount set forth herein provided that if such additional
Indebtedness shall be so incurred, the Revolving Committed Amount
hereunder shall be reduced on a dollar for dollar basis therewith.
(h) in addition to the Indebtedness otherwise permitted by this
Section 8.1, other Indebtedness hereafter incurred by the Borrower or any
of its Subsidiaries in an aggregate amount not to exceed $500,000 at any
time outstanding;
(i) Indebtedness consisting of Seller Subordinated Notes incurred
in connection with Permitted Acquisitions as permitted by Section 8.6;
and
(j) Indebtedness assumed in connection with a Permitted Acquisition
as permitted by Section 8.6, and any refinancing, refunding, renewal or
extension thereof, PROVIDED that (i) such Indebtedness was in existence as
of the date of the acquisition and was not incurred or assumed in
contemplation thereof and (ii) the amount of any such Indebtedness shall
not be increased in connection with any refinancing, refunding, renewal or
extension.
8.2 LIENS.
The Credit Parties will not permit any Consolidated Party to contract,
create, incur, assume or permit to exist any Lien with respect to any of its
Property, whether now owned or after acquired, except for Permitted Liens.
8.3 NATURE OF BUSINESS.
The Credit Parties will not permit any Consolidated Party to substantively
alter the character or conduct of the business conducted by such Person as of
the Closing Date or any related expansion (including by way of acquisition of a
business engaged in the same or a similar line of business or otherwise) or
extension thereof.
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8.4 CONSOLIDATION, MERGER, DISSOLUTION, ETC.
Except in connection with an Asset Disposition permitted by the terms of
Section 8.5, the Credit Parties will not permit any Consolidated Party to enter
into any transaction of merger or consolidation or liquidate, wind up or
dissolve itself (or suffer any liquidation or dissolution); PROVIDED that,
notwithstanding the foregoing provisions of this Section 8.4, (a) the Borrower
may merge or consolidate with any of its Subsidiaries provided that (i) the
Borrower shall be the continuing or surviving corporation, (ii) the Credit
Parties shall cause to be executed and delivered such documents, instruments and
certificates as the Agent may request so as to cause the Credit Parties to be in
compliance with the terms of Section 7.13 after giving effect to such
transaction and (iii) the Borrower shall have delivered to the Agent a Pro Forma
Compliance Certificate demonstrating that, upon giving effect on a Pro Forma
Basis to such transaction, no Default or Event of Default would exist, (b) any
Credit Party other than the Borrower may merge or consolidate with any other
Credit Party other than the Borrower PROVIDED that (i) the Credit Parties shall
cause to be executed and delivered such documents, instruments and certificates
as the Agent may request so as to cause the Credit Parties to be in compliance
with the terms of Section 7.13 after giving effect to such transaction and (ii)
the Borrower shall have delivered to the Agent a Pro Forma Compliance
Certificate demonstrating that, upon giving effect on a Pro Forma Basis to such
transaction, no Default or Event of Default would exist, (c) any Consolidated
Party which is not a Credit Party may be merged or consolidated with or into any
Credit Party other than the Borrower PROVIDED that (i) such Credit Party shall
be the continuing or surviving corporation, (ii) the Credit Parties shall cause
to be executed and delivered such documents, instruments and certificates as the
Agent may request so as to cause the Credit Parties to be in compliance with the
terms of Section 7.13 after giving effect to such transaction and (iii) the
Borrower shall have delivered to the Agent a Pro Forma Compliance Certificate
demonstrating that, upon giving effect on a Pro Forma Basis to such transaction,
no Default or Event of Default would exist, (d) any Consolidated Party which is
not a Credit Party may be merged or consolidated with or into any other
Consolidated Party which is not a Credit Party PROVIDED the Borrower shall have
delivered to the Agent a Pro Forma Compliance Certificate demonstrating that,
upon giving effect on a Pro Forma Basis to such transaction, no Default or Event
of Default would exist and (e) the Borrower may engage in Permitted
Acquisitions.
8.5 ASSET DISPOSITIONS.
The Credit Parties will not permit any Consolidated Party to make any
Asset Disposition (including, without limitation, any Sale and Leaseback
Transaction) other than Excluded Asset Dispositions unless (a) the consideration
paid in connection therewith is cash or Cash Equivalents and/or Replacement
Assets, (b) if such transaction is a Sale and Leaseback Transaction, such
transaction is permitted by the terms of Section 8.12, (c) the aggregate net
book value of all of the assets sold or otherwise disposed of by the
Consolidated Parties in all such transactions (excluding assets with respect to
which Replacement Assets are acquired) after the Closing Date shall not exceed
$1,000,000.
Upon a sale of assets or the sale of Capital Stock of a Consolidated Party
permitted by this Section 8.5, the Agent shall (to the extent applicable)
deliver to the Borrower, upon the Borrower's request and at the Borrower's
expense, such documentation as is reasonably necessary to evidence the release
of the Agent's security interest, if any, in such assets or Capital Stock,
including, without limitation, amendments or terminations of UCC financing
statements, if any, the return of stock
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certificates, if any, and the release of such Subsidiary from all of its
obligations, if any, under the Credit Documents.
8.6 INVESTMENTS.
The Credit Parties will not permit any Consolidated Party to make
Investments in or to any Person, except for Permitted Investments.
8.7 RESTRICTED PAYMENTS.
The Credit Parties will not permit any Consolidated Party to, directly or
indirectly, declare, order, make or set apart any sum for or pay any Restricted
Payment (other than payments relating to the Related Transactions which shall
occur on or about the Closing Date), except (a) to make dividends payable solely
in the same class of Capital Stock of such Person, (b) to make dividends or
other distributions payable to the Borrower (directly or indirectly through
Subsidiaries) or by one Subsidiary to another Subsidiary which is its parent,
(c) as permitted by Section 8.9, and (d) so long as no Default or Event of
Default shall have occurred and be continuing, to make payments pursuant to the
Stockholders Agreement in an aggregate amount not to exceed $4,000,000.
8.8 PREPAYMENTS OF INDEBTEDNESS, ETC.
The Credit Parties will not permit any Consolidated Party to (a) after the
issuance thereof, amend or modify (or permit the amendment or modification of)
any of the terms of any Indebtedness if such amendment or modification would add
or change any terms in a manner adverse to the issuer of such Indebtedness, or
shorten the final maturity or average life to maturity or require any payment to
be made sooner than originally scheduled or increase the interest rate
applicable thereto or change any subordination provision thereof, or (b) if any
Default or Event of Default has occurred and is continuing or would be directly
or indirectly caused as a result thereof, make (or give any notice with respect
thereto) any voluntary or optional payment or prepayment or redemption or
acquisition for value of (including without limitation, by way of depositing
money or securities with the trustee with respect thereto before due for the
purpose of paying when due), refund, refinance or exchange of any other
Indebtedness.
8.9 TRANSACTIONS WITH AFFILIATES.
Except as described on SCHEDULE 8.9, the Credit Parties will not permit
any Consolidated Party to enter into or permit to exist any transaction or
series of transactions with any officer, director, shareholder, Subsidiary or
Affiliate of such Person other than (a) loans or advances to any Credit Party,
(b) transfers of cash and assets to any Credit Party, (c) transactions permitted
by Section 8.1, Section 8.4, Section 8.5, Section 8.6, or Section 8.7, (d)
normal compensation benefits, business expense advances and reimbursement of
expenses of officers and directors and (e) except as otherwise specifically
limited in this Credit Agreement, other transactions which are entered into in
the ordinary course of such Person's business on terms and conditions
substantially as favorable to such Person as would be obtainable by it in a
comparable arms-length transaction with a Person other than an officer,
director, shareholder, Subsidiary or Affiliate.
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8.10 FISCAL YEAR; ORGANIZATIONAL DOCUMENTS.
The Credit Parties will not permit any Consolidated Party to change its
fiscal year (provided that any Subsidiary of the Borrower may change its fiscal
year to match that of the Borrower) or amend, modify or change its articles of
incorporation (or corporate charter or other similar organizational document) or
bylaws (or other similar document) without the prior written consent of the
Required Lenders.
8.11 LIMITATION ON RESTRICTED ACTIONS.
The Credit Parties will not permit any Consolidated Party to
(a) directly or indirectly, create or otherwise cause or suffer to
exist or become effective any encumbrance or restriction on the ability of
any such Person to (i) pay dividends or make any other distributions to
any Credit Party on its Capital Stock or with respect to any other
interest or participation in, or measured by, its profits, (ii) pay any
Indebtedness or other obligation owed to any Credit Party, (iii) make
loans or advances to any Credit Party, (iv) sell, lease or transfer any of
its properties or assets to any Credit Party, or (v) act as a Guarantor
and pledge its assets pursuant to the Credit Documents or any renewals,
refinancings, exchanges, refundings or extension thereof, except (in
respect of any of the matters referred to in clauses (i)-(v) above) for
such encumbrances or restrictions existing under or by reason of (A) this
Credit Agreement and the other Credit Documents, (B) applicable law, (C)
the indenture pursuant to which the Subordinated Notes are issued (as in
existence on the Closing Date) or (D) any document or instrument governing
Indebtedness incurred pursuant to Section 8.1(c) or 8.1(g), PROVIDED,
HOWEVER, that any such restriction contained therein relates only to the
asset or assets constructed or acquired in connection therewith; and
provided, further, that no such lien shall encumber any of the
Consolidated Parties' fee simple owned real property or leasehold assets,
or
(b) enter into, assume or become subject to any agreement
prohibiting or otherwise restricting the creation or assumption of any
Lien upon its properties or assets, whether now owned or hereafter
acquired, or requiring the grant of any security for such obligation if
security is given for some other obligation, except (i) pursuant to this
Credit Agreement and the other Credit Documents, (ii) the indenture
pursuant to which the Subordinated Notes are issued (as in existence on
the Closing Date) and (iii) pursuant to any document or instrument
governing Indebtedness incurred pursuant to Section 8.1(c) or 8.1(g),
PROVIDED, HOWEVER, that any such restriction contained therein relates
only to the asset or assets constructed or acquired in connection
therewith.
8.12 OWNERSHIP OF SUBSIDIARIES.
Notwithstanding any other provisions of this Credit Agreement to the
contrary, the Credit Parties will not permit any Consolidated Party to (a)
permit any Person (other than the Borrower or any Wholly-Owned Subsidiary of the
Borrower) to own any Capital Stock of any Subsidiary of the Borrower, (b) permit
any Subsidiary of the Borrower to issue Capital Stock (except to the Borrower or
to a Wholly-Owned Subsidiary of the Borrower), (c) permit, create, incur, assume
or suffer to exist any
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Lien thereon, in each case except (i) except to qualify directors where required
by applicable law or to satisfy other requirements of applicable law with
respect to the ownership of Capital Stock of Foreign Subsidiaries, (ii) except
as a result of or in connection with a dissolution, merger or disposition of a
Subsidiary permitted under Section 8.4 or Section 8.5 or (iii) except for
Permitted Liens and (d) notwithstanding anything to the contrary contained in
clause (b) above, permit any Subsidiary of the Borrower to issue any shares of
preferred Capital Stock.
8.13 SALE LEASEBACKS.
Except in connection with a transaction permitted by Section 8.1(c), the
Credit Parties will not permit any Consolidated Party to, directly or
indirectly, become or remain liable as lessee or as guarantor or other surety
with respect to any lease, whether an Operating Lease or a Capital Lease, of any
Property (whether real, personal or mixed), whether now owned or hereafter
acquired, (a) which such Consolidated Party has sold or transferred or is to
sell or transfer to a Person which is not a Consolidated Party or (b) which such
Consolidated Party intends to use for substantially the same purpose as any
other Property which has been sold or is to be sold or transferred by such
Consolidated Party to another Person which is not a Consolidated Party in
connection with such lease.
SECTION 9
EVENTS OF DEFAULT
9.1 EVENTS OF DEFAULT.
An Event of Default shall exist upon the occurrence of any of the
following specified events (each an "EVENT OF DEFAULT"):
(a) PAYMENT. Any Credit Party shall
(i) default in the payment when due of any principal of any
of the Loans or of any reimbursement obligations arising from
drawings under Letters of Credit, or
(ii) default, and such default shall continue for three (3) or
more Business Days, in the payment when due of any interest on the
Loans or on any reimbursement obligations arising from drawings
under Letters of Credit, or of any Fees or other amounts owing
hereunder, under any of the other Credit Documents or in connection
herewith or therewith; or
(b) REPRESENTATIONS. Any representation, warranty or statement
made or deemed to be made by any Credit Party herein, in any of the other
Credit Documents, or in any statement or certificate delivered or required
to be delivered pursuant hereto or thereto shall prove untrue in any
material respect on the date as of which it was deemed to have been made;
or
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(c) COVENANTS. Any Credit Party shall
(i) default in the due performance or observance of any
term, covenant or agreement contained in Sections 7.2, 7.9, 7.11,
7.12, 7.13 or 8.1 through 8.13, inclusive;
(ii) default in the due performance or observance of any
term, covenant or agreement contained in Sections 7.1(a), (b), (c)
or (d) and such default shall continue unremedied for a period of at
least 10 days after the earlier of a responsible officer of a Credit
Party becoming aware of such default or notice thereof by the Agent;
or
(iii) default in the due performance or observance by it of
any term, covenant or agreement (other than those referred to in
subsections (a), (b), (c)(i) or (c)(ii) of this Section 9.1)
contained in this Credit Agreement and such default shall continue
unremedied for a period of at least 30 days after the earlier of a
responsible officer of a Credit Party becoming aware of such default
or notice thereof by the Agent; or
(d) OTHER CREDIT DOCUMENTS. (i) Any Credit Party shall default in
the due performance or observance of any term, covenant or agreement in
any of the other Credit Documents (subject to applicable grace or cure
periods, if any), or (ii) except as a result of or in connection with a
dissolution, merger or disposition of a Subsidiary permitted under Section
8.4 or Section 8.5, any Credit Document shall fail to be in full force and
effect or to give the Agent and/or the Lenders the Liens, rights, powers
and privileges purported to be created thereby, or any Credit Party shall
so state in writing; or
(e) GUARANTIES. Except as the result of or in connection with a
dissolution, merger or disposition of a Subsidiary permitted under Section
8.4 or Section 8.5, the guaranty given by any Guarantor hereunder
(including any Additional Credit Party) or any provision thereof shall
cease to be in full force and effect, or any Guarantor (including any
Additional Credit Party) hereunder or any Person acting by or on behalf of
such Guarantor shall deny or disaffirm such Guarantor's obligations under
such guaranty, or any Guarantor shall default in the due performance or
observance of any term, covenant or agreement on its part to be performed
or observed pursuant to any guaranty; or
(f) BANKRUPTCY, ETC. Any Bankruptcy Event shall occur with
respect to any Consolidated Party; or
(g) DEFAULTS UNDER OTHER AGREEMENTS.
(i) Any Consolidated Party shall default in the performance
or observance (beyond the applicable grace period with respect
thereto, if any) or any material obligation or condition of any
contract or lease material to the Consolidated Parties; or
(ii) With respect to any Indebtedness (other than
Indebtedness outstanding under this Credit Agreement) in excess of
$250,000 in the aggregate for the Consolidated Parties taken as a
whole, (A) any Consolidated Party shall (1) default in any payment
(beyond the applicable grace period with respect thereto, if any)
with
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respect to any such Indebtedness, or (2) the occurrence and
continuance of a default in the observance or performance relating
to such Indebtedness or contained in any instrument or agreement
evidencing, securing or relating thereto, or any other event or
condition shall occur or condition exist, the effect of which
default or other event or condition is to cause, or permit, the
holder or holders of such Indebtedness (or trustee or agent on
behalf of such holders) to cause (determined without regard to
whether any notice or lapse of time is required), any such
Indebtedness to become due prior to its stated maturity; or (B) any
such Indebtedness shall be declared due and payable, or required to
be prepaid other than by a regularly scheduled required prepayment,
prior to the stated maturity thereof; or
(h) JUDGMENTS. One or more judgments or decrees shall be entered
against one or more of the Consolidated Parties involving a liability of
$500,000 or more in the aggregate (to the extent not paid or fully covered
by insurance provided by a carrier who has acknowledged coverage and has
the ability to perform) and any such judgments or decrees shall not have
been vacated, discharged or stayed or bonded pending appeal within 30 days
from the entry thereof; or
(i) ERISA. Any of the following events or conditions, if such event
or condition could have a Material Adverse Effect: (i) any "accumulated
funding deficiency," as such term is defined in Section 302 of ERISA and
Section 412 of the Code, whether or not waived, shall exist with respect
to any Plan, or any lien shall arise on the assets of any Consolidated
Party or any ERISA Affiliate in favor of the PBGC or a Plan; (ii) an ERISA
Event shall occur with respect to a Single Employer Plan, which is, in the
reasonable opinion of the Agent, likely to result in the termination of
such Plan for purposes of Title IV of ERISA; (iii) an ERISA Event shall
occur with respect to a Multiemployer Plan or Multiple Employer Plan,
which is, in the reasonable opinion of the Agent, likely to result in (A)
the termination of such Plan for purposes of Title IV of ERISA, or (B) any
Consolidated Party or any ERISA Affiliate incurring any liability in
connection with a withdrawal from, reorganization of (within the meaning
of Section 4241 of ERISA), or insolvency or (within the meaning of Section
4245 of ERISA) such Plan; or (iv) any prohibited transaction (within the
meaning of Section 406 of ERISA or Section 4975 of the Code) or breach of
fiduciary responsibility shall occur which may subject any Consolidated
Party or any ERISA Affiliate to any liability under Sections 406, 409,
502(i), or 502(l) of ERISA or Section 4975 of the Code, or under any
agreement or other instrument pursuant to which any Consolidated Party or
any ERISA Affiliate has agreed or is required to indemnify any person
against any such liability; or
(j) OWNERSHIP. There shall occur a Change of Control.
9.2 ACCELERATION; REMEDIES.
Upon the occurrence of an Event of Default, and at any time thereafter
unless and until such Event of Default has been waived by the requisite Lenders
(pursuant to the voting requirements of Section 11.6) or cured to the
satisfaction of the requisite Lenders (pursuant to the voting procedures in
Section 11.6), the Agent shall, upon the request and direction of the Required
Lenders, by written notice to the Credit Parties take any of the following
actions:
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(a) TERMINATION OF COMMITMENTS. Declare the Commitments
terminated whereupon the Commitments shall be immediately terminated.
(b) ACCELERATION. Declare the unpaid principal of and any accrued
interest in respect of all Loans, any reimbursement obligations arising
from drawings under Letters of Credit and any and all other indebtedness
or obligations of any and every kind owing by the Borrower to the Agent
and/or any of the Lenders hereunder to be due whereupon the same shall be
immediately due and payable without presentment, demand, protest or other
notice of any kind, all of which are hereby waived by the Borrower.
(c) CASH COLLATERAL. Direct the Borrower to pay (and the Borrower
agrees that upon receipt of such notice, or upon the occurrence of an
Event of Default under Section 9.1(f), it will immediately pay) to the
Agent additional cash, to be held by the Agent, for the benefit of the
Lenders, in a cash collateral account as additional security for the LOC
Obligations in respect of subsequent drawings under all then outstanding
Letters of Credit in an amount equal to the maximum aggregate amount which
may be drawn under all Letters of Credits then outstanding.
(d) ENFORCEMENT OF RIGHTS. Enforce any and all rights and interests
created and existing under the Credit Documents including, without
limitation, all rights and remedies existing under the Collateral
Documents, all rights and remedies against a Guarantor and all rights of
set-off.
Notwithstanding the foregoing, if an Event of Default specified in Section
9.1(f) shall occur, then the Commitments shall automatically terminate and all
Loans, all reimbursement obligations arising from drawings under Letters of
Credit, all accrued interest in respect thereof, all accrued and unpaid Fees and
other indebtedness or obligations owing to the Agent and/or any of the Lenders
hereunder automatically shall immediately become due and payable without the
giving of any notice or other action by the Agent or the Lenders.
SECTION 10
AGENCY PROVISIONS
10.1 APPOINTMENT, POWERS AND IMMUNITIES.
Each Lender hereby irrevocably appoints and authorizes the Agent to act as
its agent under this Credit Agreement and the other Credit Documents with such
powers and discretion as are specifically delegated to the Agent by the terms of
this Credit Agreement and the other Credit Documents, together with such other
powers as are reasonably incidental thereto. The Agent (which term as used in
this sentence and in Section 10.5 and the first sentence of Section 10.6 hereof
shall include its Affiliates and its own and its Affiliates' officers,
directors, employees, and agents): (a) shall not have any duties or
responsibilities except those expressly set forth in this Credit Agreement and
shall not be a trustee or fiduciary for any Lender; (b) shall not be responsible
to the Lenders for any recital, statement,
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representation, or warranty (whether written or oral) made in or in connection
with any Credit Document or any certificate or other document referred to or
provided for in, or received by any of them under, any Credit Document, or for
the value, validity, effectiveness, genuineness, enforceability, or sufficiency
of any Credit Document, or any other document referred to or provided for
therein or for any failure by any Credit Party or any other Person to perform
any of its obligations thereunder; (c) shall not be responsible for or have any
duty to ascertain, inquire into, or verify the performance or observance of any
covenants or agreements by any Credit Party or the satisfaction of any condition
or to inspect the property (including the books and records) of any Credit Party
or any of its Subsidiaries or Affiliates; (d) shall not be required to initiate
or conduct any litigation or collection proceedings under any Credit Document;
and (e) shall not be responsible for any action taken or omitted to be taken by
it under or in connection with any Credit Document, except for its own gross
negligence or willful misconduct. The Agent may employ agents and
attorneys-in-fact and shall not be responsible for the negligence or misconduct
of any such agents or attorneys-in-fact selected by it with reasonable care.
10.2 RELIANCE BY AGENT.
The Agent shall be entitled to rely upon any certification, notice,
instrument, writing, or other communication (including, without limitation, any
thereof by telecopy) believed by it in good faith to be genuine and correct and
to have been signed, sent or made by or on behalf of the proper Person or
Persons, and upon advice and statements of legal counsel (including counsel for
any Credit Party), independent accountants, and other experts selected by the
Agent. The Agent may deem and treat the payee of any Note as the holder thereof
for all purposes hereof unless and until the Agent receives and accepts an
Assignment and Acceptance executed in accordance with Section 11.3(b) hereof. As
to any matters not expressly provided for by this Credit Agreement, the Agent
shall not be required to exercise any discretion or take any action, but shall
be required to act or to refrain from acting (and shall be fully protected in so
acting or refraining from acting) upon the instructions of the Required Lenders,
and such instructions shall be binding on all of the Lenders; PROVIDED, HOWEVER,
that the Agent shall not be required to take any action that exposes the Agent
to personal liability or that is contrary to any Credit Document or applicable
law or unless it shall first be indemnified to its satisfaction by the Lenders
against any and all liability and expense which may be incurred by it by reason
of taking any such action.
10.3 DEFAULTS.
The Agent shall not be deemed to have knowledge or notice of the
occurrence of a Default or Event of Default unless the Agent has received
written notice from a Lender or the Borrower specifying such Default or Event of
Default and stating that such notice is a "Notice of Default". In the event that
the Agent receives such a notice of the occurrence of a Default or Event of
Default, the Agent shall give prompt notice thereof to the Lenders. The Agent
shall (subject to Section 10.2 hereof) take such action with respect to such
Default or Event of Default as shall reasonably be directed by the Required
Lenders.
10.4 RIGHTS AS A LENDER.
With respect to its Commitment and the Loans made by it, First Union
National Bank (and any successor acting as Agent) in its capacity as a Lender
hereunder shall have the same rights and powers
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hereunder as any other Lender and may exercise the same as though it were not
acting as the Agent, and the term "Lender" or "Lenders" shall, unless the
context otherwise indicates, include the Agent in its individual capacity. First
Union National Bank (and any successor acting as Agent) and its Affiliates may
(without having to account therefor to any Lender) accept deposits from, lend
money to, make investments in, provide services to, and generally engage in any
kind of lending, trust, or other business with any Credit Party or any of its
Subsidiaries or Affiliates as if it were not acting as Agent, and First Union
National Bank (and any successor acting as Agent) and its Affiliates may accept
fees and other consideration from any Credit Party or any of its Subsidiaries or
Affiliates for services in connection with this Credit Agreement or otherwise
without having to account for the same to the Lenders.
10.5 INDEMNIFICATION.
The Lenders agree to indemnify the Agent (to the extent not reimbursed
under Section 11.5 hereof, but without limiting the obligations of the Borrower
under such Section) ratably in accordance with their respective Commitments, for
any and all liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses (including attorneys' fees), or disbursements
of any kind and nature whatsoever that may be imposed on, incurred by or
asserted against the Agent (including by any Lender) in any way relating to or
arising out of any Credit Document or the transactions contemplated thereby or
any action taken or omitted by the Agent under any Credit Document; PROVIDED
that no Lender shall be liable for any of the foregoing to the extent they arise
from the gross negligence or willful misconduct of the Person to be indemnified.
Without limitation of the foregoing, each Lender agrees to reimburse the Agent
promptly upon demand for its ratable share of any costs or expenses payable by
the Borrower under Section 11.5, to the extent that the Agent is not promptly
reimbursed for such costs and expenses by the Borrower. The agreements in this
Section 10.5 shall survive the repayment of the Loans, LOC Obligations and other
obligations under the Credit Documents and the termination of the Commitments
hereunder.
10.6 NON-RELIANCE ON AGENT AND OTHER LENDERS.
Each Lender agrees that it has, independently and without reliance on the
Agent or any other Lender, and based on such documents and information as it has
deemed appropriate, made its own credit analysis of the Credit Parties and their
Subsidiaries and decision to enter into this Credit Agreement and that it will,
independently and without reliance upon the Agent or any other Lender, and based
on such documents and information as it shall deem appropriate at the time,
continue to make its own analysis and decisions in taking or not taking action
under the Credit Documents. Except for notices, reports, and other documents and
information expressly required to be furnished to the Lenders by the Agent
hereunder, the Agent shall not have any duty or responsibility to provide any
Lender with any credit or other information concerning the affairs, financial
condition, or business of any Credit Party or any of its Subsidiaries or
Affiliates that may come into the possession of the Agent or any of its
Affiliates.
10.7 SUCCESSOR AGENT.
The Agent may resign at any time by giving notice thereof to the Lenders
and the Borrower. Upon any such resignation, the Required Lenders shall have the
right to appoint a successor Agent. If
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no successor Agent shall have been so appointed by the Required Lenders and
shall have accepted such appointment within thirty (30) days after the retiring
Agent's giving of notice of resignation, then the retiring Agent may, on behalf
of the Lenders, appoint a successor Agent which shall be a commercial bank
organized under the laws of the United States of America having combined capital
and surplus of at least $100,000,000. Upon the acceptance of any appointment as
Agent hereunder by a successor, such successor shall thereupon succeed to and
become vested with all the rights, powers, discretion, privileges, and duties of
the retiring Agent, and the retiring Agent shall be discharged from its duties
and obligations hereunder. After any retiring Agent's resignation hereunder as
Agent, the provisions of this Section 10 shall continue in effect for its
benefit in respect of any actions taken or omitted to be taken by it while it
was acting as Agent.
SECTION 11
MISCELLANEOUS
11.1 NOTICES.
Except as otherwise expressly provided herein, all notices and other
communications shall have been duly given and shall be effective (a) when
delivered, (b) when transmitted via telecopy (or other facsimile device) to the
number set out below, (c) the Business Day following the day on which the same
has been delivered prepaid to a reputable national overnight air courier
service, or (d) the third Business Day following the day on which the same is
sent by certified or registered mail, postage prepaid, in each case to the
respective parties at the address, in the case of the Borrower, Guarantors and
the Agent, set forth below, and, in the case of the Lenders, set forth on
SCHEDULE 2.1(a), or at such other address as such party may specify by written
notice to the other parties hereto:
if to the Borrower or the Guarantors:
Simonds Industries, Inc.
135 Intervale Road
Fitchburg, Massachusetts 01420
Attn: Joseph L. Sylvia
Telephone: (978) 343-3731
Telecopy: (978) 343-3489
if to the Agent:
First Union National Bank
301 South College Street, DC-5
5th Floor
Charlotte, North Carolina 28288-0737
Attn: Tom Lauer
Telephone: (704) 383-4993
Telecopy: (704) 374-3300
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with a copy to:
First Union National Bank
One First Union Center
NC-0680
301 South College Street
Charlotte, NC 28288
Attn: Kevin Stephens
Telephone: (704) 383-3721
Telecopy: (704) 383-2802
11.2 RIGHT OF SET-OFF; ADJUSTMENTS.
Upon the occurrence and during the continuance of any Event of Default,
each Lender (and each of its Affiliates) is hereby authorized at any time and
from time to time, to the fullest extent permitted by law, to set off and apply
any and all deposits (general or special, time or demand, provisional or final)
at any time held and other indebtedness at any time owing by such Lender (or any
of its Affiliates) to or for the credit or the account of any Credit Party
against any and all of the obligations of such Person now or hereafter existing
under this Credit Agreement, under the Notes, under any other Credit Document or
otherwise, irrespective of whether such Lender shall have made any demand under
hereunder or thereunder and although such obligations may be unmatured. Each
Lender agrees promptly to notify any affected Credit Party after any such
set-off and application made by such Lender; PROVIDED, HOWEVER, that the failure
to give such notice shall not affect the validity of such set-off and
application. The rights of each Lender under this Section 11.2 are in addition
to other rights and remedies (including, without limitation, other rights of
set-off) that such Lender may have.
11.3 BENEFIT OF AGREEMENT.
(a) This Credit Agreement shall be binding upon and inure to the
benefit of and be enforceable by the respective successors and assigns of
the parties hereto; PROVIDED that none of the Credit Parties may assign or
transfer any of its interests and obligations without prior written
consent of the Lenders; PROVIDED FURTHER that the rights of each Lender to
transfer, assign or grant participations in its rights and/or obligations
hereunder shall be limited as set forth in this Section 11.3.
(b) Upon the consent of the Agent, which consent shall not be
unreasonably withheld, each Lender may assign to one or more Eligible
Assignees all or a portion of its rights and obligations under this Credit
Agreement (including, without limitation, all or a portion of its Loans,
its Notes, and its Commitment); PROVIDED, HOWEVER, that
(i) each such assignment shall be to an Eligible Assignee;
(ii) except in the case of an assignment to another Lender or
an assignment of all of a Lender's rights and obligations under this
Credit Agreement, any such partial assignment shall be in an amount
at least equal to $5,000,000 (or, if less, the remaining
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amount of the Commitment being assigned by such Lender) or an
integral multiple of $1,000,000 in excess thereof;
(iii) each such assignment by a Lender shall be of a constant,
and not varying, percentage of its rights and obligations under this
Credit Agreement and the Notes; and
(iv) the parties to such assignment shall execute and deliver
to the Agent for its acceptance an Assignment and Acceptance in the
form of EXHIBIT 11.3(b) hereto, together with any Note subject to
such assignment and a processing fee of $3,500.
Upon execution, delivery, and acceptance of such Assignment and
Acceptance, the assignee thereunder shall be a party hereto and, to the
extent of such assignment, have the obligations, rights, and benefits of a
Lender hereunder and the assigning Lender shall, to the extent of such
assignment, relinquish its rights and be released from its obligations
under this Credit Agreement. Upon the consummation of any assignment
pursuant to this Section 11.3(b), the assignor, the Agent and the Borrower
shall make appropriate arrangements so that, if required, new Notes are
issued to the assignor and the assignee. If the assignee is not
incorporated under the laws of the United States of America or a state
thereof, it shall deliver to the Borrower and the Agent certification as
to exemption from deduction or withholding of Taxes in accordance with
Section 3.11.
(c) The Agent shall maintain at its address referred to in Section
11.1 a copy of each Assignment and Acceptance delivered to and accepted by
it and a register for the recordation of the names and addresses of the
Lenders and the Commitment of, and principal amount of the Loans owing to,
each Lender from time to time (the "REGISTER"). The entries in the
Register shall be conclusive and binding for all purposes, absent manifest
error, and the Borrower, the Agent and the Lenders may treat each Person
whose name is recorded in the Register as a Lender hereunder for all
purposes of this Credit Agreement. The Register shall be available for
inspection by the Borrower or any Lender at any reasonable time and from
time to time upon reasonable prior notice.
(d) Upon its receipt of an Assignment and Acceptance executed by
the parties thereto, together with any Note subject to such assignment and
payment of the processing fee, the Agent shall, if such Assignment and
Acceptance has been completed and is in substantially the form of Exhibit
11.3(b) hereto, (i) accept such Assignment and Acceptance, (ii) record the
information contained therein in the Register and (iii) give prompt notice
thereof to the parties thereto.
(e) Each Lender may sell participations to one or more Persons in
all or a portion of its rights and obligations under this Credit Agreement
(including all or a portion of its Commitment and its Loans); PROVIDED,
HOWEVER, that (i) such Lender's obligations under this Credit Agreement
shall remain unchanged, (ii) such Lender shall remain solely responsible
to the other parties hereto for the performance of such obligations, (iii)
the participant shall be entitled to the benefit of the yield protection
provisions contained in Sections 3.7 through 3.12, inclusive, and the
right of set-off contained in Section 11.2, and (iv) the Borrower shall
continue to deal solely and directly with such Lender in connection with
such Lender's rights
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and obligations under this Credit Agreement, and such Lender shall retain
the sole right to enforce the obligations of the Borrower relating to its
Loans and its Notes and to approve any amendment, modification, or waiver
of any provision of this Credit Agreement (other than amendments,
modifications, or waivers decreasing the amount of principal of or the
rate at which interest is payable on such Loans or Notes, extending any
scheduled principal payment date or date fixed for the payment of interest
on such Loans or Notes, or extending its Commitment).
(f) Notwithstanding any other provision set forth in this Credit
Agreement, any Lender may at any time assign and pledge all or any portion
of its Loans and its Notes to any Federal Reserve Bank as collateral
security pursuant to Regulation A and any Operating Circular issued by
such Federal Reserve Bank. No such assignment shall release the assigning
Lender from its obligations hereunder.
(g) Any Lender may furnish any information concerning the Borrower
or any of its Subsidiaries in the possession of such Lender from time to
time to assignees and participants (including prospective assignees and
participants), subject, however, to the provisions of Section 11.14
hereof.
11.4 NO WAIVER; REMEDIES CUMULATIVE.
No failure or delay on the part of the Agent or any Lender in exercising
any right, power or privilege hereunder or under any other Credit Document and
no course of dealing between the Agent or any Lender and any of the Credit
Parties shall operate as a waiver thereof; nor shall any single or partial
exercise of any right, power or privilege hereunder or under any other Credit
Document preclude any other or further exercise thereof or the exercise of any
other right, power or privilege hereunder or thereunder. The rights and remedies
provided herein are cumulative and not exclusive of any rights or remedies which
the Agent or any Lender would otherwise have. No notice to or demand on any
Credit Party in any case shall entitle the Borrower or any other Credit Party to
any other or further notice or demand in similar or other circumstances or
constitute a waiver of the rights of the Agent or the Lenders to any other or
further action in any circumstances without notice or demand.
11.5 EXPENSES; INDEMNIFICATION.
(a) The Borrower agrees to pay on demand all costs and expenses of the
Agent in connection with the preparation, execution, delivery, administration,
modification, and amendment of this Credit Agreement, the other Credit
Documents, and the other documents to be delivered hereunder, including, without
limitation, the reasonable fees and expenses of counsel for the Agent (including
the cost of internal counsel) with respect thereto and with respect to advising
the Agent as to its rights and responsibilities under the Credit Documents. The
Borrower further agrees to pay on demand all costs and expenses of the Agent and
the Lenders, if any (including, without limitation, reasonable attorneys' fees
and expenses and the cost of internal counsel), in connection with the
enforcement (whether through negotiations, legal proceedings, or otherwise) of
the Credit Documents and the other documents to be delivered hereunder.
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(b) The Borrower agrees to indemnify and hold harmless the Agent and
each Lender and each of their Affiliates and their respective officers,
directors, employees, agents, and advisors (each, an "INDEMNIFIED PARTY") from
and against any and all claims, damages, losses, liabilities, costs, and
expenses (including, without limitation, reasonable attorneys' fees) that may be
incurred by or asserted or awarded against any Indemnified Party, in each case
arising out of or in connection with or by reason of (including, without
limitation, in connection with any investigation, litigation, or proceeding or
preparation of defense in connection therewith) the Credit Documents, any of the
transactions contemplated herein or the actual or proposed use of the proceeds
of the Loans, except to the extent such claim, damage, loss, liability, cost, or
expense is found in a final, non-appealable judgment by a court of competent
jurisdiction to have resulted from such Indemnified Party's gross negligence or
willful misconduct. In the case of an investigation, litigation or other
proceeding to which the indemnity in this Section 11.5 applies, such indemnity
shall be effective whether or not such investigation, litigation or proceeding
is brought by the Borrower, its directors, shareholders or creditors or an
Indemnified Party or any other Person or any Indemnified Party is otherwise a
party thereto and whether or not the transactions contemplated hereby are
consummated. The Borrower agrees not to assert any claim against the Agent, any
Lender, any of their Affiliates, or any of their respective directors, officers,
employees, attorneys, agents, and advisers, on any theory of liability, for
special, indirect, consequential, or punitive damages arising out of or
otherwise relating to the Credit Documents, any of the transactions contemplated
herein or the actual or proposed use of the proceeds of the Loans.
(c) Without prejudice to the survival of any other agreement of the
Borrower hereunder, the agreements and obligations of the Borrower contained in
this Section 11.5 shall survive the repayment of the Loans, LOC Obligations and
other obligations under the Credit Documents and the termination of the
Commitments hereunder.
11.6 AMENDMENTS, WAIVERS AND CONSENTS.
Neither this Credit Agreement nor any other Credit Document nor any of the
terms hereof or thereof may be amended, changed, waived, discharged or
terminated unless such amendment, change, waiver, discharge or termination is in
writing entered into by, or approved in writing by, the Required Lenders and the
Borrower, PROVIDED, HOWEVER, that:
(a) without the consent of each Lender affected thereby,
(i) extend the final maturity of any Loan or the time of
payment of any reimbursement obligation, or any portion thereof,
arising from drawings under Letters of Credit,
(ii) reduce the rate or extend the time of payment of interest
(other than as a result of waiving the applicability of any
post-default increase in interest rates) thereon or Fees hereunder,
(iii) reduce or waive the principal amount of any Loan or of
any reimbursement obligation, or any portion thereof, arising from
drawings under Letters of Credit,
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(iv) increase the Commitment of a Lender over the amount thereof
in effect (it being understood and agreed that a waiver of any
Default or Event of Default or mandatory reduction in the
Commitments shall not constitute a change in the terms of any
Commitment of any Lender),
(v) except as the result of or in connection with an Asset
Disposition permitted by Section 8.5, release all or substantially
all of the Collateral,
(vi) except as the result of or in connection with a
dissolution, merger or disposition of a Subsidiary permitted under
Section 8.4, release the Borrower or substantially all of the other
Credit Parties from its or their obligations under the Credit
Documents,
(vii) amend, modify or waive any provision of this Section 11.6
or Section 3.6, 3.7, 3.8, 3.9, 3.10, 3.11, 3.12, 3.13, 3.14, 9.1(a),
11.2, 11.3, 11.5 or 11.9,
(viii) reduce any percentage specified in, or otherwise modify,
the definition of Required Lenders, or
(ix) consent to the assignment or transfer by the Borrower or
all or substantially all of the other Credit Parties of any of its
or their rights and obligations under (or in respect of) the Credit
Documents except as permitted thereby;
(b) without the consent of the Agent, no provision of Section 10
may be amended;
(c) without the consent of the Issuing Lender, no provision of
Section 2.2 may be amended.
Notwithstanding the fact that the consent of all the Lenders is required
in certain circumstances as set forth above, (x) each Lender is entitled
to vote as such Lender sees fit on any bankruptcy reorganization plan that
affects the Loans, and each Lender acknowledges that the provisions of
Section 1126(c) of the Bankruptcy Code supersedes the unanimous consent
provisions set forth herein and (y) the Required Lenders may consent to
allow a Credit Party to use cash collateral in the context of a bankruptcy
or insolvency proceeding.
11.7 COUNTERPARTS.
This Credit Agreement may be executed in any number of counterparts, each
of which when so executed and delivered shall be an original, but all of which
shall constitute one and the same instrument. It shall not be necessary in
making proof of this Credit Agreement to produce or account for more than one
such counterpart for each of the parties hereto. Delivery by facsimile by any of
the parties hereto of an executed counterpart of this Credit Agreement shall be
as effective as an original executed counterpart hereof and shall be deemed a
representation that an original executed counterpart hereof will be delivered.
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11.8 HEADINGS.
The headings of the sections and subsections hereof are provided for
convenience only and shall not in any way affect the meaning or construction of
any provision of this Credit Agreement.
11.9 SURVIVAL.
All indemnities set forth herein, including, without limitation, in
Section 2.2(i), 3.11, 3.12, 10.5 or 11.5 shall survive the execution and
delivery of this Credit Agreement, the making of the Loans, the issuance of the
Letters of Credit, the repayment of the Loans, LOC Obligations and other
obligations under the Credit Documents and the termination of the Commitments
hereunder, and all representations and warranties made by the Credit Parties
herein shall survive delivery of the Notes and the making of the Loans
hereunder.
11.10 GOVERNING LAW; SUBMISSION TO JURISDICTION; VENUE.
(a) THIS CREDIT AGREEMENT AND THE OTHER CREDIT DOCUMENTS AND THE
RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER AND THEREUNDER SHALL BE
GOVERNED BY AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH THE LAWS OF
THE STATE OF NORTH CAROLINA. Any legal action or proceeding with respect
to this Credit Agreement or any other Credit Document may be brought in
the courts of the State of North Carolina in Mecklenburg County, or of the
United States for the Western District of North Carolina, and, by
execution and delivery of this Credit Agreement, each of the Credit
Parties hereby irrevocably accepts for itself and in respect of its
property, generally and unconditionally, the nonexclusive jurisdiction of
such courts. Each of the Credit Parties further irrevocably consents to
the service of process out of any of the aforementioned courts in any such
action or proceeding by the mailing of copies thereof by registered or
certified mail, postage prepaid, to it at the address set out for notices
pursuant to Section 11.1, such service to become effective three (3) days
after such mailing. Nothing herein shall affect the right of the Agent or
any Lender to serve process in any other manner permitted by law or to
commence legal proceedings or to otherwise proceed against any Credit
Party in any other jurisdiction.
(b) Each of the Credit Parties hereby irrevocably waives any
objection which it may now or hereafter have to the laying of venue of any
of the aforesaid actions or proceedings arising out of or in connection
with this Credit Agreement or any other Credit Document brought in the
courts referred to in subsection (a) above and hereby further irrevocably
waives and agrees not to plead or claim in any such court that any such
action or proceeding brought in any such court has been brought in an
inconvenient forum.
(c) TO THE EXTENT PERMITTED BY LAW, EACH OF THE AGENT, THE LENDERS,
THE BORROWER AND THE CREDIT PARTIES HEREBY IRREVOCABLY WAIVES ALL RIGHT TO
TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR
RELATING TO THIS CREDIT AGREEMENT, ANY OF THE OTHER CREDIT DOCUMENTS OR
THE TRANSACTIONS CONTEMPLATED HEREBY.
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11.11 SEVERABILITY.
If any provision of any of the Credit Documents is determined to be
illegal, invalid or unenforceable, such provision shall be fully severable and
the remaining provisions shall remain in full force and effect and shall be
construed without giving effect to the illegal, invalid or unenforceable
provisions.
11.12 ENTIRETY.
This Credit Agreement together with the other Credit Documents represent
the entire agreement of the parties hereto and thereto, and supersede all prior
agreements and understandings, oral or written, if any, including any commitment
letters or correspondence relating to the Credit Documents or the transactions
contemplated herein and therein.
11.13 BINDING EFFECT; TERMINATION.
(a) This Credit Agreement shall become effective at such time on or
after the Closing Date when it shall have been executed by the Borrower,
the Guarantors and the Agent, and the Agent shall have received copies
hereof (telefaxed or otherwise) which, when taken together, bear the
signatures of each Lender, and thereafter this Credit Agreement shall be
binding upon and inure to the benefit of the Borrower, the Guarantors, the
Agent and each Lender and their respective successors and assigns.
(b) The term of this Credit Agreement shall be until no Loans, LOC
Obligations or any other amounts payable hereunder or under any of the
other Credit Documents shall remain outstanding, no Letters of Credit
shall be outstanding, all of the Credit Party Obligations have been
irrevocably satisfied in full and all of the Commitments hereunder shall
have expired or been terminated.
11.14 SOURCE OF FUNDS.
Each of the Lenders hereby represents and warrants to the Borrower that at
least one of the following statements is an accurate representation as to the
source of funds to be used by such Lender in connection with the financing
hereunder:
(a) no part of such funds constitutes assets allocated to any
separate account maintained by such Lender in which any employee benefit
plan (or its related trust) has any interest;
(b) to the extent that any part of such funds constitutes assets
allocated to any separate account maintained by such Lender, such Lender
has disclosed to the Borrower the name of each employee benefit plan whose
assets in such account exceed 10% of the total assets of such account as
of the date of such purchase (and, for purposes of this subsection (b),
all employee benefit plans maintained by the same employer or employee
organization are deemed to be a single plan);
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(c) to the extent that any part of such funds constitutes assets of
an insurance company's general account, such insurance company has
complied with all of the requirements of the regulations issued under
Section 401(c)(1)(A) of ERISA; or
(d) such funds constitute assets of one or more specific benefit
plans which such Lender has identified in writing to the Borrower.
As used in this Section 11.14, the terms "employee benefit plan" and "separate
account" shall have the respective meanings assigned to such terms in Section 3
of ERISA.
11.15 CONFLICT.
To the extent that there is a conflict or inconsistency between any
provision hereof, on the one hand, and any provision of any Credit Document, on
the other hand, this Credit Agreement shall control.
[Signature Page to Follow]
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IN WITNESS WHEREOF, each of the parties hereto has caused a counterpart of
this Credit Agreement to be duly executed and delivered as of the date first
above written.
BORROWER: SIMONDS INDUSTRIES INC.
- --------- a Delaware corporation
By: _________________________________________
Name: _______________________________________
Title: ______________________________________
GUARANTORS: ARMSTRONG MANUFACTURING COMPANY
- -----------
By: _________________________________________
Name: _______________________________________
Title: ______________________________________
SIMONDS HOLDING COMPANY, INC.
By: _________________________________________
Name: _______________________________________
Title: ______________________________________
SIMONDS INDUSTRIES FSC, INC.
By: _________________________________________
Name: _______________________________________
Title: ______________________________________
NOTTING AMERICA, INC.
By: _________________________________________
Name: _______________________________________
Title: ______________________________________
<PAGE> 95
LENDERS: FIRST UNION NATIONAL BANK,
- -------- individually in its capacity as a Lender
and in its capacity as Agent
By: _________________________________________
Name: _______________________________________
Title: ______________________________________
HELLER FINANCIAL, INC.
By: _________________________________________
Name: _______________________________________
Title: ______________________________________
<PAGE> 96
EXHIBIT 1.1A
FORM OF PLEDGE AGREEMENT
THIS PLEDGE AGREEMENT (this "PLEDGE AGREEMENT") is entered into as of July
2, 1998 among SIMONDS INDUSTRIES INC., a [DELAWARE] corporation (the
"BORROWER"), the Guarantors indicated on the signature pages hereto
(individually a "GUARANTOR" and collectively the "GUARANTORS", together with the
Borrower, individually a "PLEDGOR" and collectively the "PLEDGORS") and FIRST
UNION NATIONAL BANK, in its capacity as agent (in such capacity, the "AGENT")
for the lenders from time to time party to the Credit Agreement described below
(the "LENDERS").
RECITALS
WHEREAS, pursuant to that certain Credit Agreement dated as of the date
hereof (as amended, modified, extended, renewed or replaced from time to time,
the "CREDIT AGREEMENT") among the Borrower, the Guarantors, the Lenders and the
Agent, the Lenders have agreed to make Loans and issue Letters of Credit upon
the terms and subject to the conditions set forth therein; and
WHEREAS, it is a condition precedent to the effectiveness of the Credit
Agreement and the obligations of the Lenders to make their respective Loans and
to issue Letters of Credit under the Credit Agreement that the Pledgors shall
have executed and delivered this Pledge Agreement to the Agent for the ratable
benefit of the Lenders.
NOW, THEREFORE, in consideration of these premises and other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto agree as follows:
1. DEFINITIONS. Unless otherwise defined herein, capitalized terms used
herein shall have the meanings ascribed to such terms in the Credit Agreement.
For purposes of this Pledge Agreement, the term "Lender" shall include any
Affiliate of any Lender which has entered into a Hedging Agreement with the
Borrower.
2. PLEDGE AND GRANT OF SECURITY INTEREST. To secure the prompt payment
and performance in full when due, whether by lapse of time or otherwise, of the
Pledgor Obligations (as defined in Section 3 hereof), each Pledgor hereby
pledges and assigns to the Agent, for the benefit of the Lenders, and grants to
the Agent, for the benefit of the Lenders, a continuing security interest in any
and all right, title and interest of such Pledgor in and to the following,
whether now owned or existing or owned, acquired, or arising hereafter
(collectively, the "PLEDGED COLLATERAL"):
(a) PLEDGED SHARES. (i) 100% (or, if less, the full amount owned by
such Pledgor) of the issued and outstanding shares of capital stock owned
by such Pledgor of each Domestic Subsidiary set forth on SCHEDULE 2(A)
attached hereto and (ii) 65% (or, if less, the full amount owned by such
Pledgor) of the issued and outstanding shares of each class of capital
stock or other ownership interests entitled to vote (within the meaning of
Treas. Reg. Section 1.956-
<PAGE> 97
2(c)(2)) ("VOTING EQUITY") and 100% (or, if less, the full amount owned by
such Pledgor) of the issued and outstanding shares of each class of
capital stock or other ownership interests not entitled to vote (within
the meaning of Treas. Reg. Section 1.956-2(c)(2)) ("NON-VOTING EQUITY")
owned by such Pledgor of each Foreign Subsidiary set forth on SCHEDULE
2(a) attached hereto, in each case together with the certificates (or
other agreements or instruments), if any, representing such shares, and
all options and other rights, contractual or otherwise, with respect
thereto (collectively, together with the shares of capital stock described
in Section 2(b) and 2(c) below, the "PLEDGED SHARES"), including, but not
limited to, the following:
(y) all shares or securities representing a dividend on any of
the Pledged Shares, or representing a distribution or return of
capital upon or in respect of the Pledged Shares, or resulting from
a stock split, revision, reclassification or other exchange
therefor, and any subscriptions, warrants, rights or options issued
to the holder of, or otherwise in respect of, the Pledged Shares;
and
(z) without affecting the obligations of the Pledgors under
any provision prohibiting such action hereunder or under the Credit
Agreement, in the event of any consolidation or merger involving the
issuer of any Pledged Shares and in which such issuer is not the
surviving corporation, all shares of each class of the capital stock
of the successor corporation formed by or resulting from such
consolidation or merger.
(b) ADDITIONAL SHARES. With respect to the Borrower and the
Guarantors, 100% (or, if less, the full amount owned by such Pledgor) of
the issued and outstanding shares of capital stock owned by such Pledgor
of any Person which hereafter becomes a Domestic Subsidiary and 65% (or,
if less, the full amount owned by such Pledgor) of the Voting Equity and
100% (or, if less, the full amount owned by such Pledgor) of the
Non-Voting Equity owned by such Pledgor of any Person which hereafter
becomes a Foreign Subsidiary, including, without limitation, the
certificates representing such shares.
(c) OTHER EQUITY INTERESTS. Any and all other Capital Stock of
the Borrower and the Guarantors in any Domestic Subsidiary or any Foreign
Subsidiary.
(d) PROCEEDS. All proceeds and products of the foregoing, however
and whenever acquired and in whatever form.
Without limiting the generality of the foregoing, it is hereby
specifically understood and agreed that a Pledgor may from time to time
hereafter deliver additional shares of stock to the Agent as collateral security
for the Pledgor Obligations. Upon delivery to the Agent, such additional shares
of stock shall be deemed to be part of the Pledged Collateral of such Pledgor
and shall be subject to the terms of this Pledge Agreement whether or not
SCHEDULE 2(a) is amended to refer to such additional shares.
3. SECURITY FOR PLEDGOR OBLIGATIONS. The security interest created
hereby in the Pledged Collateral of each Pledgor constitutes continuing
collateral security for all of the following, whether now existing or hereafter
incurred (the "PLEDGOR OBLIGATIONS"):
<PAGE> 98
(a) In the case of the Borrower, the prompt performance and
observance by the Borrower of all obligations of the Borrower under the
Credit Agreement, the Notes, this Pledge Agreement and the other Credit
Documents to which the Borrower is a party;
(b) In the case of the Guarantors, the prompt performance and
observance by the Guarantors of all obligations of the Guarantors under
the Credit Agreement, this Pledge Agreement and the other Credit Documents
to which any Guarantor is a party, including, without limitation, its
guaranty obligations arising under Section 4 of the Credit Agreement; and
(c) All other indebtedness, liabilities and obligations of any kind
or nature, now existing or hereafter arising, owing from any Pledgor to
any Lender or the Agent, howsoever evidenced, created, incurred or
acquired, whether primary, secondary, direct, contingent, or joint and
several, including, without limitation, all liabilities arising under
Hedging Agreements and all obligations and liabilities incurred in
connection with collecting and enforcing the Pledgor Obligations.
4. DELIVERY OF THE PLEDGED COLLATERAL. Each Pledgor hereby agrees that:
(a) Each Pledgor shall deliver to the Agent (i) simultaneously with
or prior to the execution and delivery of this Pledge Agreement, all
certificates representing the Pledged Shares of such Pledgor and (ii)
promptly upon the receipt thereof by or on behalf of a Pledgor, all other
certificates and instruments constituting Pledged Collateral of a Pledgor.
Prior to delivery to the Agent, all such certificates and instruments
constituting Pledged Collateral of a Pledgor shall be held in trust by
such Pledgor for the benefit of the Agent pursuant hereto. All such
certificates shall be delivered in suitable form for transfer by delivery
or shall be accompanied by duly executed instruments of transfer or
assignment in blank, substantially in the form provided in EXHIBIT 4(a)
attached hereto.
(b) ADDITIONAL SECURITIES. If such Pledgor shall receive by virtue
of its being or having been the owner of any Pledged Collateral, any (i)
stock certificate, including without limitation, any certificate
representing a stock dividend or distribution in connection with any
increase or reduction of capital, reclassification, merger, consolidation,
sale of assets, combination of shares, stock splits, spin-off or
split-off, promissory notes or other instrument; (ii) option or right,
whether as an addition to, substitution for, or an exchange for, any
Pledged Collateral or otherwise; (iii) dividends payable in securities; or
(iv) distributions of securities in connection with a partial or total
liquidation, dissolution or reduction of capital, capital surplus or
paid-in surplus, then such Pledgor shall receive such stock certificate,
instrument, option, right or distribution in trust for the benefit of the
Agent, shall segregate it from such Pledgor's other property and shall
deliver it forthwith to the Agent in the exact form received together with
any necessary endorsement and/or appropriate stock power duly executed in
blank, substantially in the form provided in EXHIBIT 4(a), to be held by
the Agent as Pledged Collateral and as further collateral security for the
Pledgor Obligations.
<PAGE> 99
(c) FINANCING STATEMENTS. Each Pledgor shall execute and deliver to
the Agent such UCC or other applicable financing statements as may be
reasonably requested by the Agent in order to perfect and protect the
security interest created hereby in the Pledged Collateral of such
Pledgor.
5. REPRESENTATIONS AND WARRANTIES. Each Pledgor hereby represents and
warrants to the Agent, for the benefit of the Lenders, that so long as any of
the Pledgor Obligations remain outstanding or any Credit Document or Hedging
Agreement is in effect or any Letter of Credit shall remain outstanding, and
until all of the Commitments shall have been terminated:
(a) AUTHORIZATION OF PLEDGED SHARES. The Pledged Shares are duly
authorized and validly issued, are fully paid and nonassessable and are
not subject to the preemptive rights of any Person. All other shares of
stock constituting Pledged Collateral will be duly authorized and validly
issued, fully paid and nonassessable and not subject to the preemptive
rights of any Person.
(b) TITLE. Each Pledgor has good and indefeasible title to the
Pledged Collateral of such Pledgor and will at all times be the legal and
beneficial owner of such Pledged Collateral free and clear of any Lien,
other than Permitted Liens. There exists no "adverse claim" within the
meaning of Section 8-302 of the Uniform Commercial Code as in effect in
the State of North Carolina (the "UCC") with respect to the Pledged Shares
of such Pledgor.
(c) EXERCISING OF RIGHTS. The exercise by the Agent of its rights
and remedies hereunder will not violate any law or governmental regulation
or any material contractual restriction binding on or affecting a Pledgor
or any of its property.
(d) PLEDGOR'S AUTHORITY. No authorization, approval or action by,
and no notice or filing with any Governmental Authority or with the issuer
of any Pledged Stock is required either (i) for the pledge made by a
Pledgor or for the granting of the security interest by a Pledgor pursuant
to this Pledge Agreement or (ii) for the exercise by the Agent or the
Lenders of their rights and remedies hereunder (except as may be required
by laws affecting the offering and sale of securities).
(e) SECURITY INTEREST/PRIORITY. This Pledge Agreement creates a
valid security interest in favor of the Agent for the benefit of the
Lenders, in the Pledged Collateral. The taking possession by the Agent of
the certificates representing the Pledged Shares and all other
certificates and instruments constituting Pledged Collateral will perfect
and establish the first priority of the Agent's security interest in the
Pledged Shares and, when properly perfected by filing or registration, in
all other Pledged Collateral represented by such Pledged Shares and
instruments securing the Pledgor Obligations. Except as set forth in this
Section 5(e), no action is necessary to perfect or otherwise protect such
security interest.
(f) NO OTHER SHARES. Except as set forth on SCHEDULE 2(a) attached
hereto, no Pledgor owns any shares of stock of the Borrower or any of its
Subsidiaries.
<PAGE> 100
6. COVENANTS. Each Pledgor hereby covenants, that so long as any of the
Pledgor Obligations remain outstanding or any Credit Document or Hedging
Agreement is in effect or any Letter of Credit shall remain outstanding, and
until all of the Commitments shall have been terminated, such Pledgor shall:
(a) BOOKS AND RECORDS. Mark its books and records (and shall cause
the issuer of the Pledged Shares of such Pledgor to mark its books and
records) to reflect the security interest granted to the Agent, for the
benefit of the Lenders, pursuant to this Pledge Agreement.
(b) DEFENSE OF TITLE. Warrant and defend title to and ownership of
the Pledged Collateral of such Pledgor at its own expense against the
claims and demands of all other parties claiming an interest therein, keep
the Pledged Collateral free from all Liens, except for Permitted Liens,
and not sell, exchange, transfer, assign, lease or otherwise dispose of
Pledged Collateral of such Pledgor or any interest therein, except as
permitted under the Credit Agreement and the other Credit Documents.
(c) FURTHER ASSURANCES. Promptly execute and deliver at its expense
all further instruments and documents and take all further action that may
be necessary and desirable or that the Agent may reasonably request in
order to (i) perfect and protect the security interest created hereby in
the Pledged Collateral of such Pledgor (including without limitation any
and all action necessary to satisfy the Agent that the Agent has obtained
a first priority perfected security interest in any capital stock); (ii)
enable the Agent to exercise and enforce its rights and remedies hereunder
in respect of the Pledged Collateral of such Pledgor; and (iii) otherwise
effect the purposes of this Pledge Agreement, including, without
limitation and if requested by the Agent, delivering to the Agent
irrevocable proxies in respect of the Pledged Collateral of such Pledgor.
(d) AMENDMENTS. Not make or consent to any amendment or other
modification or waiver with respect to any of the Pledged Collateral of
such Pledgor or enter into any agreement or allow to exist any restriction
with respect to any of the Pledged Collateral of such Pledgor other than
pursuant hereto or as may be permitted under the Credit Agreement.
(e) COMPLIANCE WITH SECURITIES LAWS. File all reports and other
information now or hereafter required to be filed by such Pledgor with the
United States Securities and Exchange Commission and any other state,
federal or foreign agency in connection with the ownership of the Pledged
Collateral of such Pledgor.
7. ADVANCES BY LENDERS. On failure of any Pledgor to perform any of the
covenants and agreements contained herein, the Agent may, at its sole option and
in its sole discretion, perform the same and in so doing may expend such sums as
the Agent may reasonably deem advisable in the performance thereof, including,
without limitation, the payment of any insurance premiums, the payment of any
taxes, a payment to obtain a release of a Lien or potential Lien, expenditures
made in defending against any adverse claim and all other expenditures which the
Agent or the Lenders may make for the protection of the security hereof or which
may be compelled to make by operation of law. All such sums and amounts so
expended shall be repayable by the Pledgors on a joint and several basis
promptly upon timely notice
<PAGE> 101
thereof and demand therefor, shall constitute additional Pledgor Obligations and
shall bear interest from the date said amounts are expended at the default rate
specified in SECTION 3.1 of the Credit Agreement for Revolving Loans that are
Base Rate Loans. No such performance of any covenant or agreement by the Agent
or the Lenders on behalf of any Pledgor, and no such advance or expenditure
therefor, shall relieve the Pledgors of any default under the terms of this
Pledge Agreement, the other Credit Documents or any Hedging Agreement. The
Lenders may make any payment hereby authorized in accordance with any bill,
statement or estimate procured from the appropriate public office or holder of
the claim to be discharged without inquiry into the accuracy of such bill,
statement or estimate or into the validity of any tax assessment, sale,
forfeiture, tax lien, title or claim except to the extent such payment is being
contested in good faith by a Pledgor in appropriate proceedings and against
which adequate reserves are being maintained in accordance with GAAP.
8. EVENTS OF DEFAULT. The occurrence of an event which under the
Credit Agreement would constitute an Event of Default shall be an Event of
Default hereunder (an "EVENT OF DEFAULT").
9. REMEDIES.
(a) GENERAL REMEDIES. Upon the occurrence of an Event of Default and
during the continuation thereof, the Agent and the Lenders shall have, in
respect of the Pledged Collateral of any Pledgor, in addition to the
rights and remedies provided herein, in the Credit Documents, in the
Hedging Agreements or by law, the rights and remedies of a secured party
under the UCC or any other applicable law.
(b) SALE OF PLEDGED COLLATERAL. Upon the occurrence of an Event of
Default and during the continuation thereof, without limiting the
generality of this Section and without notice, the Agent may, in its sole
discretion, sell or otherwise dispose of or realize upon the Pledged
Collateral, or any part thereof, in one or more parcels, at public or
private sale, at any exchange or broker's board or elsewhere, at such
price or prices and on such other terms as the Agent may deem commercially
reasonable, for cash, credit or for future delivery or otherwise in
accordance with applicable law. To the extent permitted by law, any Lender
may in such event, bid for the purchase of such securities. Each Pledgor
agrees that, to the extent notice of sale shall be required by law and has
not been waived by such Pledgor, any requirement of reasonable notice
shall be met if notice, specifying the place of any public sale or the
time after which any private sale is to be made, is personally served on
or mailed, postage prepaid, to such Pledgor, in accordance with the notice
provisions of SECTION 11.1 of the Credit Agreement (at least 10 days
before the time of such sale. The Agent shall not be obligated to make any
sale of Pledged Collateral of such Pledgor regardless of notice of sale
having been given. The Agent may adjourn any public or private sale from
time to time by announcement at the time and place fixed therefor, and
such sale may, without further notice, be made at the time and place to
which it was so adjourned.
(c) PRIVATE SALE. Upon the occurrence of an Event of Default and
during the continuation thereof, the Pledgors recognize that the Agent may
deem it impracticable to effect a public sale of all or any part of the
Pledged Shares or any of the securities constituting Pledged Collateral
and that the Agent may, therefore, determine to make one or more private
<PAGE> 102
sales of any such securities to a restricted group of purchasers who will
be obligated to agree, among other things, to acquire such securities for
their own account, for investment and not with a view to the distribution
or resale thereof. Each Pledgor acknowledges that any such private sale
may be at prices and on terms less favorable to the seller than the prices
and other terms which might have been obtained at a public sale and,
notwithstanding the foregoing, agrees that such private sale shall be
deemed to have been made in a commercially reasonable manner and that the
Agent shall have no obligation to delay sale of any such securities for
the period of time necessary to permit the issuer of such securities to
register such securities for public sale under the Securities Act of 1933.
Each Pledgor further acknowledges and agrees that any offer to sell such
securities which has been (i) publicly advertised on a bona fide basis in
a newspaper or other publication of general circulation in the financial
community of New York, New York (to the extent that such offer may be
advertised without prior registration under the Securities Act of 1933),
or (ii) made privately in the manner described above shall be deemed to
involve a "public sale" under the UCC, notwithstanding that such sale may
not constitute a "public offering" under the Securities Act of 1933, and
the Agent may, in such event, bid for the purchase of such securities.
(d) RETENTION OF PLEDGED COLLATERAL. In addition to the rights and
remedies hereunder, upon the occurrence of an Event of Default, the Agent
may, after providing the notices required by Section 9-505(2) of the UCC
or otherwise complying with the requirements of applicable law of the
relevant jurisdiction, retain all or any portion of the Pledged Collateral
in satisfaction of the Pledgor Obligations. Unless and until the Agent
shall have provided such notices, however, the Agent shall not be deemed
to have retained any Pledged Collateral in satisfaction of any Pledgor
Obligations for any reason.
(e) DEFICIENCY. In the event that the proceeds of any sale,
collection or realization are insufficient to pay all amounts to which the
Agent or the Lenders are legally entitled, the Pledgors shall be jointly
and severally liable for the deficiency, together with interest thereon at
the default rate specified in SECTION 3.1 of the Credit Agreement for
Revolving Loans that are Base Rate Loans, together with the costs of
collection and the reasonable fees of any attorneys employed by the Agent
to collect such deficiency. Any surplus remaining after the full payment
and satisfaction of the Pledgor Obligations shall be returned to the
Pledgors or to whomsoever a court of competent jurisdiction shall
determine to be entitled thereto.
10. RIGHTS OF THE AGENT.
(a) POWER OF ATTORNEY. In addition to other powers of attorney
contained herein, each Pledgor hereby designates and appoints the Agent,
on behalf of the Lenders, and each of its designees or agents as
attorney-in-fact of such Pledgor, irrevocably and with power of
substitution, with authority to take any or all of the following actions
upon the occurrence and during the continuance of an Event of Default:
(i) to demand, collect, settle, compromise, adjust and
give discharges and releases concerning the Pledged Collateral of
such Pledgor, all as the Agent may reasonably determine;
<PAGE> 103
(ii) to commence and prosecute any actions at any court
for the purposes of collecting any of the Pledged Collateral of
such Pledgor and enforcing any other right in respect thereof;
(iii) to defend, settle or compromise any action brought
and, in connection therewith, give such discharge or release as the
Agent may deem reasonably appropriate;
(iv) to pay or discharge taxes, liens, security
interests, or other encumbrances levied or placed on or threatened
against the Pledged Collateral of such Pledgor;
(v) to direct any parties liable for any payment under
any of the Pledged Collateral to make payment of any and all monies
due and to become due thereunder directly to the Agent or as the
Agent shall direct;
(vi) to receive payment of and receipt for any and all
monies, claims, and other amounts due and to become due at any time
in respect of or arising out of any Pledged Collateral of such
Pledgor;
(vii) to sign and endorse any drafts, assignments,
proxies, stock powers, verifications, notices and other documents
relating to the Pledged Collateral of such Pledgor;
(viii) to settle, compromise or adjust any suit, action or
proceeding described above and, in connection therewith, to give
such discharges or releases as the Agent may deem reasonably
appropriate;
(ix) execute and deliver all assignments, conveyances,
statements, financing statements, renewal financing statements,
pledge agreements, affidavits, notices and other agreements,
instruments and documents that the Agent may determine necessary in
order to perfect and maintain the security interests and liens
granted in this Pledge Agreement and in order to fully consummate
all of the transactions contemplated therein;
(x) to exchange any of the Pledged Collateral of such
Pledgor or other property upon any merger, consolidation,
reorganization, recapitalization or other readjustment of the issuer
thereof and, in connection therewith, deposit any of the Pledged
Collateral of such Pledgor with any committee, depository, transfer
agent, registrar or other designated agency upon such terms as the
Agent may determine;
(xi) to vote for a shareholder resolution, or to sign an
instrument in writing, sanctioning the transfer of any or all of the
Pledged Shares of such Pledgor into the name of the Agent or one or
more of the Lenders or into the name of any transferee
<PAGE> 104
to whom the Pledged Shares of such Pledgor or any part thereof may
be sold pursuant to Section 9 hereof; and
(xii) to do and perform all such other acts and things as
the Agent may reasonably deem to be necessary, proper or convenient
in connection with the Pledged Collateral of such Pledgor.
This power of attorney is a power coupled with an interest and shall be
irrevocable (i) for so long as any of the Pledgor Obligations remain
outstanding, any Credit Document or any Hedging Agreement is in effect or
any Letter of Credit shall remain outstanding and (ii) until all of the
Commitments shall have been terminated. The Agent shall be under no duty
to exercise or withhold the exercise of any of the rights, powers,
privileges and options expressly or implicitly granted to the Agent in
this Pledge Agreement, and shall not be liable for any failure to do so or
any delay in doing so. The Agent shall not be liable for any act or
omission or for any error of judgment or any mistake of fact or law in its
individual capacity or its capacity as attorney-in-fact except acts or
omissions resulting from its gross negligence or willful misconduct. This
power of attorney is conferred on the Agent solely to protect, preserve
and realize upon its security interest in Pledged Collateral.
(b) PERFORMANCE BY THE AGENT OF PLEDGOR'S OBLIGATIONS. If any
Pledgor fails to perform any agreement or obligation contained herein, the
Agent itself may perform, or cause performance of, such agreement or
obligation, and the expenses of the Agent incurred in connection therewith
shall be payable by the Pledgors on a joint and several basis pursuant to
Section 13 hereof.
(c) ASSIGNMENT BY THE AGENT. The Agent may from time to time
assign the Pledgor Obligations and any portion thereof and/or the Pledged
Collateral and any portion thereof, and the assignee shall be entitled to
all of the rights and remedies of the Agent under this Pledge Agreement in
relation thereto.
(d) THE AGENT'S DUTY OF CARE. Other than the exercise of
reasonable care to assure the safe custody of the Pledged Collateral while
being held by the Agent hereunder, the Agent shall have no duty or
liability to preserve rights pertaining thereto, it being understood and
agreed that Pledgors shall be responsible for preservation of all rights
in the Pledged Collateral of such Pledgor, and the Agent shall be relieved
of all responsibility for Pledged Collateral upon surrendering it or
tendering the surrender of it to the Pledgors. The Agent shall be deemed
to have exercised reasonable care in the custody and preservation of the
Pledged Collateral in its possession if such Pledged Collateral is
accorded treatment substantially equal to that which the Agent accords its
own property, which shall be no less than the treatment employed by a
reasonable and prudent agent in the industry, it being understood that the
Agent shall not have responsibility for (i) ascertaining or taking action
with respect to calls, conversions, exchanges, maturities, tenders or
other matters relating to any Pledged Collateral, whether or not the Agent
has or is deemed to have knowledge of such matters; or (ii) taking any
necessary steps to preserve rights against any parties with respect to any
Pledged Collateral.
<PAGE> 105
(e) VOTING RIGHTS IN RESPECT OF THE PLEDGED COLLATERAL.
(i) So long as no Event of Default shall have occurred
and be continuing, to the extent permitted by law, each Pledgor may
exercise any and all voting and other consensual rights pertaining
to the Pledged Collateral of such Pledgor or any part thereof for
any purpose not inconsistent with the terms of this Pledge Agreement
or the Credit Agreement; and
(ii) Upon the occurrence and during the continuance of
an Event of Default, all rights of a Pledgor to exercise the voting
and other consensual rights which it would otherwise be entitled to
exercise pursuant to paragraph (i) of this Section shall cease and
all such rights shall thereupon become vested in the Agent which
shall then have the sole right to exercise such voting and other
consensual rights.
(f) DIVIDEND RIGHTS IN RESPECT OF THE PLEDGED COLLATERAL.
(i) So long as no Event of Default shall have occurred
and be continuing and subject to Section 4(b) hereof, each Pledgor
may receive and retain any and all dividends (other than stock
dividends and other dividends constituting Pledged Collateral which
are addressed hereinabove) or interest paid in respect of the
Pledged Collateral to the extent they are allowed under the Credit
Agreement.
(ii) Upon the occurrence and during the continuance of
an Event of Default:
(A) all rights of a Pledgor to receive the dividends
and interest payments which it would otherwise be authorized
to receive and retain pursuant to paragraph (i) of this
Section shall cease and all such rights shall thereupon be
vested in the Agent which shall then have the sole right to
receive and hold as Pledged Collateral such dividends and
interest payments; and
(B) all dividends and interest payments which are
received by a Pledgor contrary to the provisions of paragraph
(A) of this Section shall be received in trust for the benefit
of the Agent, shall be segregated from other property or funds
of such Pledgor, and shall be forthwith paid over to the Agent
as Pledged Collateral in the exact form received, to be held
by the Agent as Pledged Collateral and as further collateral
security for the Pledgor Obligations.
(g) RELEASE OF PLEDGED COLLATERAL. The Agent may release any of
the Pledged Collateral from this Pledge Agreement or may substitute any of
the Pledged Collateral for other Pledged Collateral without altering,
varying or diminishing in any way the force, effect, lien, pledge or
security interest of this Pledge Agreement as to any Pledged Collateral
not expressly released or substituted, and this Pledge Agreement shall
continue as a first priority lien on all Pledged Collateral not expressly
released or substituted.
<PAGE> 106
11. RIGHTS OF REQUIRED LENDERS. All rights of the Agent hereunder, if
not exercised by the Agent, may be exercised by the Required Lenders.
12. APPLICATION OF PROCEEDS. Upon the occurrence and during the
continuance of an Event of Default, any payments in respect of the Pledgor
Obligations and any proceeds of any Pledged Collateral, when received by the
Agent or any of the Lenders in cash or its equivalent, will be applied in
reduction of the Pledgor Obligations in the order set forth in SECTION 3.15(b)
of the Credit Agreement, and each Pledgor irrevocably waives the right to direct
the application of such payments and proceeds and acknowledges and agrees that
the Agent shall have the continuing and exclusive right to apply and reapply any
and all such payments and proceeds in the Agent's sole discretion,
notwithstanding any entry to the contrary upon any of its books and records.
13. COSTS OF COUNSEL. If at any time hereafter, whether upon the
occurrence of an Event of Default or not, the Agent employs counsel to prepare
or consider amendments, waivers or consents with respect to this Pledge
Agreement, or to take action or make a response in or with respect to any legal
or arbitral proceeding relating to this Pledge Agreement or relating to the
Pledged Collateral, or to protect the Pledged Collateral or exercise any rights
or remedies under this Pledge Agreement or with respect to the Pledged
Collateral, then the Pledgors agree to promptly pay upon demand any and all such
reasonable documented costs and expenses of the Agent or the Lenders, all of
which costs and expenses shall constitute Pledgor Obligations hereunder.
14. CONTINUING AGREEMENT.
(a) This Pledge Agreement shall be a continuing agreement in every
respect and shall remain in full force and effect so long as any of the
Pledgor Obligations remain outstanding or any Credit Document or Hedging
Agreement is in effect or any Letter of Credit shall remain outstanding,
and until all of the Commitments thereunder shall have terminated (other
than any obligations with respect to the indemnities and the
representations and warranties set forth in the Credit Documents). Upon
such payment and termination, this Pledge Agreement shall be automatically
terminated and the Agent and the Lenders shall, upon the request and at
the expense of the Pledgors, forthwith release all of its liens and
security interests hereunder and shall execute and deliver all UCC
termination statements and/or other documents reasonably requested by the
Pledgors evidencing such termination. Notwithstanding the foregoing all
releases and indemnities provided hereunder shall survive termination of
this Pledge Agreement.
(b) This Pledge Agreement shall continue to be effective or be
automatically reinstated, as the case may be, if at any time payment, in
whole or in part, of any of the Pledgor Obligations is rescinded or must
otherwise be restored or returned by the Agent or any Lender as a
preference, fraudulent conveyance or otherwise under any bankruptcy,
insolvency or similar law, all as though such payment had not been made;
provided that in the event payment of all or any part of the Pledgor
Obligations is rescinded or must be restored or returned, all reasonable
costs and expenses (including without limitation any reasonable legal fees
and disbursements) incurred by the Agent or any Lender in defending and
enforcing such reinstatement shall be deemed to be included as a part of
the Pledgor Obligations.
<PAGE> 107
15. AMENDMENTS; WAIVERS; MODIFICATIONS. This Pledge Agreement and the
provisions hereof may not be amended, waived, modified, changed, discharged or
terminated except as set forth in SECTION 11.6 of the Credit Agreement.
16. SUCCESSORS IN INTEREST. This Pledge Agreement shall create a
continuing security interest in the Collateral and shall be binding upon each
Pledgor, its successors and assigns and shall inure, together with the rights
and remedies of the Agent and the Lenders hereunder, to the benefit of the Agent
and the Lenders and their successors and permitted assigns; PROVIDED, HOWEVER,
that none of the Pledgors may assign its rights or delegate its duties hereunder
without the prior written consent of each Lender or the Required Lenders, as
required by the Credit Agreement. To the fullest extent permitted by law, each
Pledgor hereby releases the Agent and each Lender, and its successors and
assigns, from any liability for any act or omission relating to this Pledge
Agreement or the Collateral, except for any liability arising from the gross
negligence or willful misconduct of the Agent, or such Lender, or its officers,
employees or agents.
17. NOTICES. All notices required or permitted to be given under this
Pledge Agreement shall be in conformance with SECTION 11.1 of the Credit
Agreement.
18. COUNTERPARTS. This Pledge Agreement may be executed in any number of
counterparts, each of which where so executed and delivered shall be an
original, but all of which shall constitute one and the same instrument. It
shall not be necessary in making proof of this Pledge Agreement to produce or
account for more than one such counterpart.
19. HEADINGS. The headings of the sections and subsections hereof are
provided for convenience only and shall not in any way affect the meaning or
construction of any provision of this Pledge Agreement.
20. GOVERNING LAW; SUBMISSION TO JURISDICTION; VENUE.
(a) THIS PLEDGE AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE
PARTIES HEREUNDER SHALL BE GOVERNED BY AND CONSTRUED AND INTERPRETED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NORTH CAROLINA. Any legal action
or proceeding with respect to this Pledge Agreement may be brought in the
courts of the State of North Carolina, or of the United States for the
Western District of North Carolina, and, by execution and delivery of this
Pledge Agreement, each Pledgor hereby irrevocably accepts for itself and
in respect of its property, generally and unconditionally, the
jurisdiction of such courts. Each Pledgor further irrevocably consents to
the service of process out of any of the aforementioned courts in any such
action or proceeding by the mailing of copies thereof by registered or
certified mail, postage prepaid, to it at the address for notices pursuant
to SECTION 11.1 of the Credit Agreement, such service to become effective
30 days after such mailing. Nothing herein shall affect the right of the
Agent to serve process in any other manner permitted by law or to commence
legal proceedings or to otherwise proceed against any Pledgor in any other
jurisdiction.
<PAGE> 108
(b) Each Pledgor hereby irrevocably waives any objection which it
may now or hereafter have to the laying of venue of any of the aforesaid
actions or proceedings arising out of or in connection with this Pledge
Agreement brought in the courts referred to in subsection (a) hereof and
hereby further irrevocably waives and agrees not to plead or claim in any
such court that any such action or proceeding brought in any such court
has been brought in an inconvenient forum.
21. WAIVER OF JURY TRIAL. TO THE EXTENT PERMITTED BY APPLICABLE LAW,
EACH OF THE PARTIES TO THIS PLEDGE AGREEMENT HEREBY IRREVOCABLY WAIVES ALL RIGHT
TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR
RELATING TO THIS PLEDGE AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.
22. SEVERABILITY. If any provision of any of the Pledge Agreement is
determined to be illegal, invalid or unenforceable, such provision shall be
fully severable and the remaining provisions shall remain in full force and
effect and shall be construed without giving effect to the illegal, invalid or
unenforceable provisions.
23. ENTIRETY. This Pledge Agreement, the other Credit Documents and the
Hedging Agreements represent the entire agreement of the parties hereto and
thereto, and supersede all prior agreements and understandings, oral or written,
if any, including any commitment letters or correspondence relating to the
Credit Documents, the Hedging Agreements or the transactions contemplated herein
and therein.
24. SURVIVAL. All representations and warranties of the Pledgors
hereunder shall survive the execution and delivery of this Pledge Agreement, the
other Credit Documents and the Hedging Agreements, the delivery of the Notes and
the making of the Loans and the issuance of the Letters of Credit under the
Credit Agreement.
25. OTHER SECURITY. To the extent that any of the Pledgor Obligations
are now or hereafter secured by property other than the Pledged Collateral
(including, without limitation, real and other personal property owned by a
Pledgor), or by a guarantee, endorsement or property of any other Person, then
the Agent and the Lenders shall have the right to proceed against such other
property, guarantee or endorsement upon the occurrence of any Event of Default,
and the Agent and the Lenders have the right, in their sole discretion, to
determine which rights, security, liens, security interests or remedies the
Agent and the Lenders shall at any time pursue, relinquish, subordinate, modify
or take with respect thereto, without in any way modifying or affecting any of
them or any of the Agent's and the Lenders' rights or the Pledgor Obligations
under this Pledge Agreement, under any other of the Credit Documents or under
any Hedging Agreement.
<PAGE> 109
26. OBLIGATIONS OF PLEDGORS.
(a) Each of the Pledgors is accepting joint and several liability
hereunder in consideration of the financial accommodation to be provided
by the Lenders under the Credit Agreement, for the mutual benefit,
directly and indirectly, of each of the Pledgors and in consideration of
the undertakings of each of the Pledgors to accept joint and several
liability for the obligations of each of them.
(b) Each of the Pledgors, jointly and severally hereby irrevocably
and unconditionally accepts, not merely as a surety but also as a
co-debtor, joint and several liability with the other Pledgors with
respect to the payment and performance of all of the Pledgor Obligations
arising under this Pledge Agreement, the other Credit Documents and the
Hedging Agreements, it being the intention of the parties hereto that all
the Pledgor Obligations shall be the joint and several obligations of each
of the Pledgors without preferences or distinction among them.
(c) Notwithstanding any provision to the contrary contained herein
or in any other of the Credit Documents, to the extent the obligations of
a Guarantor shall be adjudicated to be invalid or unenforceable for any
reason (including, without limitation, because of any applicable state or
federal law relating to fraudulent conveyances or transfers) then the
obligations of each Guarantor hereunder shall be limited to the maximum
amount that is permissible under applicable law (whether federal or state
and including, without limitation, the Bankruptcy Code).
<PAGE> 110
Each of the parties hereto has caused a counterpart of this Pledge
Agreement to be duly executed and delivered as of the date first above written.
BORROWER: SIMONDS INDUSTRIES INC.,
- --------- a Delaware corporation
By: __________________________
Name: ________________________
Title: _______________________
GUARANTORS:
- -----------
______________________________
By: __________________________
Name: ________________________
Title: _______________________
______________________________
By: __________________________
Name: ________________________
Title: _______________________
______________________________
By: __________________________
Name: ________________________
Title: _______________________
<PAGE> 111
Accepted and agreed to in Charlotte, North Carolina as of the date first
above written.
FIRST UNION NATIONAL BANK,
as Agent
By: __________________________
Name: ________________________
Title: _______________________
<PAGE> 112
SCHEDULE 2(a)
to
Pledge Agreement
dated as of _______________, 1998
in favor of First Union National Bank
as Agent
PLEDGED STOCK
PLEDGOR:
Number of Certificate Percentage
Name of Subsidiary Shares Number Ownership
- ------------------ ------ ------ ---------
Number of Certificate Percentage
Shares Number Ownership
------ ------ ---------
<PAGE> 113
EXHIBIT 4(a)
to
Pledge Agreement
dated as of ________________, 1998
in favor of First Union National Bank
as Agent
IRREVOCABLE STOCK POWER
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers to
the following shares of capital stock of _____________________, a ____________
corporation:
No. of Shares Certificate No.
------------- ---------------
and irrevocably appoints __________________________________ its agent and
attorney-in-fact to transfer all or any part of such capital stock and to take
all necessary and appropriate action to effect any such transfer. The agent and
attorney-in-fact may substitute and appoint one or more persons to act for him.
The effectiveness of a transfer pursuant to this stock power shall be subject to
any and all transfer restrictions referenced on the face of the certificates
evidencing such interest or in the certificate of incorporation or bylaws of the
subject corporation, to the extent they may from time to time exist.
________________,
a ______________ corporation
By: ____________________________
Name: __________________________
Title: _________________________
<PAGE> 114
EXHIBIT 1.1B
FORM OF SECURITY AGREEMENT
THIS SECURITY AGREEMENT (this "SECURITY AGREEMENT") is entered into as of
July 2, 1998 among SIMONDS INDUSTRIES INC., a [DELAWARE] corporation (the
"BORROWER"), the Guarantors indicated on the signature pages hereto
(individually a "GUARANTOR" and collectively the "GUARANTORS"; together with the
Borrower, individually an "OBLIGOR" and collectively the "OBLIGORS") and FIRST
UNION NATIONAL BANK, in its capacity as agent (in such capacity, the "AGENT")
for the lenders from time to time party to the Credit Agreement described below
(the "LENDERS").
RECITALS
WHEREAS, pursuant to that certain Credit Agreement dated as of the date
hereof (as amended, modified, extended, renewed or replaced from time to time,
the "CREDIT AGREEMENT"), among the Borrower, the Guarantors, the Lenders and the
Agent, the Lenders have agreed to make Loans and issue Letters of Credit upon
the terms and subject to the conditions set forth therein; and
WHEREAS, it is a condition precedent to the effectiveness of the Credit
Agreement and the obligations of the Lenders to make their respective Loans and
to issue Letters of Credit under the Credit Agreement that the Obligors shall
have executed and delivered this Security Agreement to the Agent for the ratable
benefit of the Lenders.
NOW, THEREFORE, in consideration of these premises and other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto agree as follows:
1. DEFINITIONS.
(a) Unless otherwise defined herein, capitalized terms used herein
shall have the meanings ascribed to such terms in the Credit Agreement,
and the following terms which are defined in the Uniform Commercial Code
in effect in the State of North Carolina on the date hereof are used
herein as so defined: Accounts, Chattel Paper, Deposit Accounts,
Documents, Equipment, Farm Products, Fixtures, General Intangibles,
Instruments, Inventory, Investment Property and Proceeds. For purposes of
this Security Agreement, the term "Lender" shall include any Affiliate of
any Lender which has entered into a Hedging Agreement with the Borrower.
(b) In addition, the following terms shall have the following
meanings:
"COPYRIGHT LICENSES": any written agreement, naming any Obligor as
licensor, granting any right under any Copyright including, without
limitation, any thereof referred to in SCHEDULE 6.17 to the Credit
Agreement.
"COPYRIGHTS": (a) all registered United States copyrights in all
Works, now existing or hereafter created or acquired, all registrations
and recordings thereof, and all applications in
<PAGE> 115
connection therewith, including, without limitation, registrations,
recordings and applications in the United States Copyright office
including, without limitation, any thereof referred to in SCHEDULE 6.17 to
the Credit Agreement, and (b) all renewals thereof including, without
limitation, any thereof referred to in SCHEDULE 6.17 to the Credit
Agreement.
"PATENT LICENSE": all agreements, whether written or oral, providing
for the grant by or to an Obligor of any right to manufacture, use or sell
any invention covered by a Patent, including, without limitation, any
thereof referred to in SCHEDULE 6.17 to the Credit Agreement.
"PATENTS": (a) all letters patent of the United States or any other
country and all reissues and extensions thereof, including, without
limitation, any thereof referred to in SCHEDULE 6.17 to the Credit
Agreement, and (b) all applications for letters patent of the United
States or any other country and all divisions, continuations and
continuations-in-part thereof, including, without limitation, any thereof
referred to in SCHEDULE 6.17 to the Credit Agreement.
"SECURED OBLIGATIONS": the collective reference to the following:
(a) In the case of the Borrower, the prompt performance
and observance by the Borrower of all obligations of the Borrower
under the Credit Agreement, the Notes, this Security Agreement and
the other Credit Documents to which the Borrower is a party;
(b) In the case of the Guarantors, the prompt
performance and observance by the Guarantors of all obligations of
the Guarantors under the Credit Agreement, this Security Agreement
and the other Credit Documents to which any Guarantor is a party,
including, without limitation, its guaranty obligations arising
under Section 4 of the Credit Agreement; and
(c) All other indebtedness, liabilities and obligations
of any kind or nature, now existing or hereafter arising, owing from
any Obligor to any Lender or the Agent, howsoever evidenced,
created, incurred or acquired, whether primary, secondary, direct,
contingent, or joint and several, including, without limitation, all
liabilities arising under Hedging Agreements and all obligations and
liabilities incurred in connection with collecting and enforcing the
Secured Obligations.
"TRADEMARK LICENSE": means any agreement, written or oral, providing
for the grant by or to an Obligor of any right to use any Trademark,
including, without limitation, any thereof referred to in SCHEDULE 6.17 to
the Credit Agreement.
"TRADEMARKS": (a) all trademarks, trade names, corporate names,
company names, business names, fictitious business names, trade styles,
service marks, logos and other source or business identifiers, and the
goodwill associated therewith, now existing or hereafter adopted or
acquired, all registrations and recordings thereof, and all applications
in connection therewith, whether in the United States Patent and Trademark
Office or in any similar office or agency of the United States, any State
thereof or any other country or any political subdivision thereof, or
<PAGE> 116
otherwise, including, without limitation, any thereof referred to in
SCHEDULE 6.17 to the Credit Agreement, and (b) all renewals thereof.
"WORK": any work which is subject to copyright protection pursuant
to Title 17 of the United States Code.
2. GRANT OF SECURITY INTEREST IN THE COLLATERAL. To secure the prompt
payment and performance in full when due, whether by lapse of time, acceleration
or otherwise, of the Secured Obligations, each Obligor hereby grants to the
Agent, for the benefit of the Lenders, a continuing security interest in, and a
right to set off against, any and all right, title and interest of such Obligor
in and to the following, whether now owned or existing or owned, acquired, or
arising hereafter (collectively, the "COLLATERAL"):
(a) all Accounts;
(b) all Chattel Paper;
(c) all Copyrights;
(d) all Copyright Licenses;
(e) all Deposit Accounts;
(f) all Documents;
(g) all Equipment;
(h) all Fixtures;
(i) all General Intangibles;
(j) all Instruments;
(k) all Inventory;
(l) Investment Property;
(m) all Patents;
(n) all Patent Licenses;
(o) all Trademarks;
(p) all Trademark Licenses;
<PAGE> 117
(q) all books, records, ledger cards, files,
correspondence, computer programs, tapes, disks, and related
data processing software (owned by such Obligor or in which it
has an interest) that at any time evidence or contain
information relating to any Collateral or are otherwise
necessary or helpful in the collection thereof or realization
thereupon; and
(r) to the extent not otherwise included, all Proceeds
and products of any and all of the foregoing.
The Obligors and the Agent, on behalf of the Lenders, hereby acknowledge
and agree that the security interest created hereby in the Collateral (i)
constitutes continuing collateral security for all of the Secured Obligations,
whether now existing or hereafter arising and (ii) is not to be construed as an
assignment of any Copyrights, Copyright Licenses, Patents, Patent Licenses,
Trademarks or Trademark Licenses.
3. PROVISIONS RELATING TO ACCOUNTS.
(a) Anything herein to the contrary notwithstanding, each of the
Obligors shall remain liable under each of the Accounts to observe and
perform all the conditions and obligations to be observed and performed by
it thereunder, all in accordance with the terms of any agreement giving
rise to each such Account. Neither the Agent nor any Lender shall have any
obligation or liability under any Account (or any agreement giving rise
thereto) by reason of or arising out of this Security Agreement or the
receipt by the Agent or any Lender of any payment relating to such Account
pursuant hereto, nor shall the Agent or any Lender be obligated in any
manner to perform any of the obligations of an Obligor under or pursuant
to any Account (or any agreement giving rise thereto), to make any
payment, to make any inquiry as to the nature or the sufficiency of any
payment received by it or as to the sufficiency of any performance by any
party under any Account (or any agreement giving rise thereto), to present
or file any claim, to take any action to enforce any performance or to
collect the payment of any amounts which may have been assigned to it or
to which it may be entitled at any time or times.
(b) Once during each calendar year or at any time after the
occurrence and during the continuation of an Event of Default, the Agent
shall have the right, but not the obligation, to make test verifications
of the Accounts in any manner and through any medium that it reasonably
considers advisable, and the Obligors shall furnish all such assistance
and information as the Agent may require in connection with such test
verifications. At any time and from time to time, upon the Agent's request
and at the expense of the Obligors, the Obligors shall cause independent
public accountants or others satisfactory to the Agent to furnish to the
Agent reports showing reconciliations, aging and test verifications of,
and trial balances for, the Accounts. The Agent in its own name or in the
name of others may communicate with account debtors on the Accounts to
verify with them to the Agent's satisfaction the existence, amount and
terms of any Accounts.
4. REPRESENTATIONS AND WARRANTIES. Each Obligor hereby represents and
warrants to the Agent, for the benefit of the Lenders, that so long as any of
the Secured Obligations remain outstanding
<PAGE> 118
or any Credit Document or Hedging Agreement is in effect or any Letter of
Credit shall remain outstanding, and until all of the Commitments shall
have been terminated:
(a) CHIEF EXECUTIVE OFFICE; BOOKS & RECORDS. Each Obligor's chief
executive office and chief place of business is (and for the prior four
months have been) located at the locations set forth on SCHEDULE 6.20(c)
to the Credit Agreement, and each Obligor keeps its books and records at
such locations.
(b) LOCATION OF COLLATERAL. The location of all Collateral owned by
each Obligor is as shown on SCHEDULE 6.20(B) to the Credit Agreement.
(c) OWNERSHIP. Each Obligor is the legal and beneficial owner of its
Collateral and has the right to pledge, sell, assign or transfer the same.
Each Obligor's legal name is as shown in this Security Agreement and no
Obligor has in the past four months changed its name, been party to a
merger, consolidation or other change in structure or used any tradename.
(d) SECURITY INTEREST/PRIORITY. This Security Agreement creates a
valid security interest in favor of the Agent, for the benefit of the
Lenders, in the Collateral of such Obligor and, when properly perfected by
filing, shall constitute a valid perfected security interest in such
Collateral, to the extent such security can be perfected by filing under
the UCC, free and clear of all Liens except for Permitted Liens.
(e) FARM PRODUCTS. None of the Collateral constitutes, or is the
Proceeds of, Farm Products.
(f) ACCOUNTS. (i) Each Account of the Obligors and the papers and
documents relating thereto are genuine and in all material respects what
they purport to be, (ii) each Account arises out of (A) a bona fide sale
of goods sold and delivered by such Obligor (or is in the process of being
delivered) or (B) services theretofore actually rendered by such Obligor
to, the account debtor named therein, (iii) no Account of an Obligor is
evidenced by any Instrument or Chattel Paper unless such Instrument or
Chattel Paper has been theretofore endorsed over and delivered to the
Agent and (iv) no surety bond was required or given in connection with any
Account of an Obligor or the contracts or purchase orders out of which
they arose.
(g) INVENTORY. No Inventory is held by an Obligor pursuant to
consignment, sale or return, sale on approval or similar arrangement.
(h) COPYRIGHTS, PATENTS AND TRADEMARKS.
(i) SCHEDULE 6.17 to the Credit Agreement includes all
Copyrights, Copyright Licenses, Patents, Patent Licenses, Trademarks
and Trademark Licenses owned by the Obligors in their own names as
of the date hereof.
<PAGE> 119
(ii) To the best of each Obligor's knowledge, each
Copyright, Patent and Trademark of such Obligor is valid,
subsisting, unexpired, enforceable and has not been abandoned.
(iii) Except as set forth in SCHEDULE 6.17 to the Credit
Agreement, none of such Copyrights, Patents and Trademarks is the
subject of any licensing or franchise agreement.
(iv) No holding, decision or judgment has been rendered
by any Governmental Authority which would limit, cancel or question
the validity of any Copyright, Patent or Trademark.
(v) To the best of each Obligor's knowledge, no action
or proceeding is pending seeking to limit, cancel or question the
validity of any Copyright, Patent or Trademark, or which, if
adversely determined, would have a material adverse effect on the
value of any Copyright, Patent or Trademark.
(vi) All applications pertaining to the Copyrights,
Patents and Trademarks of each Obligor have been duly and properly
filed, and all registrations or letters pertaining to such
Copyrights, Patents and Trademarks have been duly and properly filed
and issued, and all of such Copyrights, Patents and Trademarks are
valid and enforceable.
(vii) No Obligor has made any assignment or agreement in
conflict with the security interest in the Copyrights, Patents or
Trademarks of each Obligor hereunder.
5. COVENANTS. Each Obligor covenants that, so long as any of the
Secured Obligations remain outstanding or any Credit Document or Hedging
Agreement is in effect or any Letter of Credit shall remain outstanding, and
until all of the Commitments shall have been terminated, such Obligor shall:
(a) OTHER LIENS. Defend the Collateral against the claims and
demands of all other parties claiming an interest therein, keep the
Collateral free from all Liens, except for Permitted Liens, and not sell,
exchange, transfer, assign, lease or otherwise dispose of the Collateral
or any interest therein, except as permitted under the Credit Agreement.
(b) PRESERVATION OF COLLATERAL. Keep the Collateral in good order,
condition and repair and not use the Collateral in violation of the
provisions of this Security Agreement or any other agreement relating to
the Collateral or any policy insuring the Collateral or any applicable
statute, law, bylaw, rule, regulation or ordinance.
(c) INSTRUMENTS/CHATTEL PAPER. If any amount payable under or in
connection with any of the Collateral shall be or become evidenced by any
Instrument or Chattel Paper, immediately deliver such Instrument or
Chattel Paper to the Agent, duly indorsed in a manner satisfactory to the
Agent, to be held as Collateral pursuant to this Security Agreement.
<PAGE> 120
(d) CHANGE IN LOCATION. Not, without providing 30 days prior written
notice to the Agent and without filing such amendments to any previously
filed financing statements as the Agent may require, (a) change the
location of its chief executive office and chief place of business (as
well as its books and records) from the locations set forth on SCHEDULE
6.20(c) to the Credit Agreement, (b) change the location of its Collateral
from the locations set forth for such Obligor on SCHEDULE 6.20(b) to the
Credit Agreement, or (c) change its name, be party to a merger,
consolidation or other change in structure or use any tradename.
(e) INSPECTION. Upon reasonable notice, and during reasonable hours,
at all times allow the Agent or its representatives to visit and inspect
the Collateral as set forth in SECTION 7.10 of the Credit Agreement.
(f) PERFECTION OF SECURITY INTEREST. Execute and deliver to the
Agent such agreements, assignments or instruments (including affidavits,
notices, reaffirmations and amendments and restatements of existing
documents, as the Agent may reasonably request) and do all such other
things as the Agent may reasonably deem necessary or appropriate (i) to
assure to the Agent its security interests hereunder, including (A) such
financing statements (including renewal statements) or amendments thereof
or supplements thereto or other instruments as the Agent may from time to
time reasonably request in order to perfect and maintain the security
interests granted hereunder in accordance with the UCC, (B) with regard to
Copyrights, a Notice of Grant of Security Interest in Copyrights in the
form of SCHEDULE 5(f)(i) ATTACHED HERETO, (C) with regard to Patents, a
Notice of Grant of Security Interest in Patents for filing with the United
States Patent and Trademark Office in the form of SCHEDULE 5(f)(ii)
attached hereto and (D) with regard to Trademarks, a Notice of Grant of
Security Interest in Trademarks for filing with the United States Patent
and Trademark Office in the form of SCHEDULE 5(f)(iii) attached hereto,
(ii) to consummate the transactions contemplated hereby and (iii) to
otherwise protect and assure the Agent of its rights and interests
hereunder. To that end, each Obligor agrees that the Agent may file one or
more financing statements disclosing the Agent's security interest in any
or all of the Collateral of such Obligor without, to the extent permitted
by law, such Obligor's signature thereon, and further each Obligor also
hereby irrevocably makes, constitutes and appoints the Agent, its nominee
or any other person whom the Agent may designate, as such Obligor's
attorney in fact with full power and for the limited purpose to sign in
the name of such Obligor any such financing statements, or amendments and
supplements to financing statements, renewal financing statements, notices
or any similar documents which in the Agent's reasonable discretion would
be necessary, appropriate or convenient in order to perfect and maintain
perfection of the security interests granted hereunder, such power, being
coupled with an interest, being and remaining irrevocable so long as the
Credit Agreement is in effect or any amounts payable thereunder or under
any other Credit Document, any Letter of Credit or any Hedging Agreement
shall remain outstanding, and until all of the Commitments thereunder
shall have terminated. Each Obligor hereby agrees that a carbon,
photographic or other reproduction of this Security Agreement or any such
financing statement is sufficient for filing as a financing statement by
the Agent without notice thereof to such Obligor wherever the Agent may in
its sole discretion desire to file the same. In the event for any reason
the law of any jurisdiction other than North Carolina becomes or is
applicable to the Collateral of any Obligor or any part thereof, or to any
of the Secured
<PAGE> 121
Obligations, such Obligor agrees to execute and deliver all such
instruments and to do all such other things as the Agent in its sole
discretion reasonably deems necessary or appropriate to preserve, protect
and enforce the security interests of the Agent under the law of such
other jurisdiction (and, if an Obligor shall fail to do so promptly upon
the request of the Agent, then the Agent may execute any and all such
requested documents on behalf of such Obligor pursuant to the power of
attorney granted hereinabove). If any Collateral is in the possession or
control of an Obligor's agents and the Agent so requests, such Obligor
agrees to notify such agents in writing of the Agent's security interest
therein and, upon the Agent's request, instruct them to hold all such
Collateral for the Lenders' account and subject to the Agent's
instructions. Each Obligor agrees to mark its books and records to reflect
the security interest of the Agent in the Collateral.
(g) TREATMENT OF ACCOUNTS. Not grant or extend the time for payment
of any Account, or compromise or settle any Account for less than the full
amount thereof, or release any person or property, in whole or in part,
from payment thereof, or allow any credit or discount thereon, other than
as normal and customary in the ordinary course of an Obligor's business.
(h) COVENANTS RELATING TO COPYRIGHTS.
(i) Employ the Copyright for each Work with such
notice of copyright as may be required by law to secure copyright
protection.
(ii) Not do any act or knowingly omit to do any act
whereby any material Copyright may become invalidated and (A) not do
any act, or knowingly omit to do any act, whereby any material
Copyright may become injected into the public domain; (B) notify the
Agent immediately if it knows, or has reason to know, that any
material Copyright may become injected into the public domain or of
any adverse determination or development (including, without
limitation, the institution of, or any such determination or
development in, any court or tribunal in the United States or any
other country) regarding an Obligor's ownership of any such
Copyright or its validity; (C) take all necessary steps as it shall
deem appropriate under the circumstances, to maintain and pursue
each application (and to obtain the relevant registration) and to
maintain each registration of each material Copyright owned by an
Obligor including, without limitation, filing of applications for
renewal where necessary; and (D) promptly notify the Agent of any
material infringement of any material Copyright of an Obligor of
which it becomes aware and take such actions as it shall reasonably
deem appropriate under the circumstances to protect such Copyright,
including, where appropriate, the bringing of suit for infringement,
seeking injunctive relief and seeking to recover any and all damages
for such infringement.
(iii) Not make any assignment or agreement in conflict
with the security interest in the Copyrights of each Obligor
hereunder.
(i) COVENANTS RELATING TO PATENTS AND TRADEMARKS.
<PAGE> 122
(i) (A) Continue to use each Trademark on each and
every trademark class of goods applicable to its current line as
reflected in its current catalogs, brochures and price lists in
order to maintain such Trademark in full force free from any claim
of abandonment for non-use, (B) maintain as in the past the quality
of products and services offered under such Trademark, (C) employ
such Trademark with the appropriate notice of registration, (D) not
adopt or use any mark which is confusingly similar or a colorable
imitation of such Trademark unless the Agent, for the ratable
benefit of the Lenders, shall obtain a perfected security interest
in such mark pursuant to this Security Agreement, and (E) not (and
not permit any licensee or sublicensee thereof to) do any act or
knowingly omit to do any act whereby any Trademark may become
invalidated.
(ii) Not do any act, or omit to do any act, whereby any
Patent may become abandoned or dedicated.
(iii) Notify the Agent and the Lenders immediately if it
knows, or has reason to know, that any application or registration
relating to any Patent or Trademark may become abandoned or
dedicated, or of any adverse determination or development
(including, without limitation, the institution of, or any such
determination or development in, any proceeding in the United States
Patent and Trademark Office or any court or tribunal in any country)
regarding an Obligor's ownership of any Patent or Trademark or its
right to register the same or to keep and maintain the same.
(iv) Whenever an Obligor, either by itself or through
an agent, employee, licensee or designee, shall file an application
for the registration of any Patent or Trademark with the United
States Patent and Trademark Office or any similar office or agency
in any other country or any political subdivision thereof, an
Obligor shall report such filing to the Agent and the Lenders within
five Business Days after the last day of the fiscal quarter in which
such filing occurs. Upon request of the Agent, an Obligor shall
execute and deliver any and all agreements, instruments, documents
and papers as the Agent may request to evidence the Agent's and the
Lenders' security interest in any Patent or Trademark and the
goodwill and general intangibles of an Obligor relating thereto or
represented thereby.
(v) Take all reasonable and necessary steps, including,
without limitation, in any proceeding before the United States
Patent and Trademark Office, or any similar office or agency in any
other country or any political subdivision thereof, to maintain and
pursue each application (and to obtain the relevant registration)
and to maintain each registration of all Patents and Trademarks,
including, without limitation, filing of applications for renewal,
affidavits of use and affidavits of incontestability.
(vi) Promptly notify the Agent and the Lenders after it
learns that any Patent or Trademark included in the Collateral is
infringed, misappropriated or diluted by a third party and promptly
sue for infringement, misappropriation or dilution, to seek
injunctive relief where appropriate and to recover any and all
damages for such
<PAGE> 123
infringement, misappropriation or dilution, or take such other
actions as it shall reasonably deem appropriate under the
circumstances to protect such Patent or Trademark.
(vii) Not make any assignment or agreement in conflict
with the security interest in the Patents or Trademarks of each
Obligor hereunder.
(j) NEW PATENTS, COPYRIGHTS AND TRADEMARKS. Promptly provide the
Agent with (i) a listing of all applications, if any, for new Copyrights,
Patents or Trademarks (together with a listing of the issuance of
registrations or letters on present applications), which new applications
and issued registrations or letters shall be subject to the terms and
conditions hereunder, and (ii) (A) with respect to Copyrights, a duly
executed Notice of Security Interest in Copyrights, (B) with respect to
Patents, a duly executed Notice of Security Interest in Patents, (C) with
respect to Trademarks, a duly executed Notice of Security Interest in
Trademarks or (D) such other duly executed documents as the Agent may
request in a form acceptable to counsel for the Agent and suitable for
recording to evidence the security interest in the Copyright, Patent or
Trademark which is the subject of such new application.
(k) INSURANCE. Insure, repair and replace the Collateral of such
Obligor as set forth in the Credit Agreement. All insurance proceeds shall
be subject to the security interest of the Agent hereunder.
6. ADVANCES BY LENDERS. On failure of any Obligor to perform any of the
covenants and agreements contained herein, the Agent may, at its sole option and
in its sole discretion, perform the same and in so doing may expend such sums as
the Agent may reasonably deem advisable in the performance thereof, including,
without limitation, the payment of any insurance premiums, the payment of any
taxes, a payment to obtain a release of a Lien or potential Lien, expenditures
made in defending against any adverse claim and all other expenditures which the
Agent or the Lenders may make for the protection of the security hereof or which
may be compelled to make by operation of law. All such sums and amounts so
expended shall be repayable by the Obligors on a joint and several basis
promptly upon timely notice thereof and demand therefor, shall constitute
additional Secured Obligations and shall bear interest from the date said
amounts are expended at the default rate specified in SECTION 3.1 of the Credit
Agreement for Revolving Loans that are Base Rate Loans. No such performance of
any covenant or agreement by the Agent or the Lenders on behalf of any Obligor,
and no such advance or expenditure therefor, shall relieve the Obligors of any
default under the terms of this Security Agreement, the other Credit Documents
or any Hedging Agreement. The Lenders may make any payment hereby authorized in
accordance with any bill, statement or estimate procured from the appropriate
public office or holder of the claim to be discharged without inquiry into the
accuracy of such bill, statement or estimate or into the validity of any tax
assessment, sale, forfeiture, tax lien, title or claim except to the extent such
payment is being contested in good faith by an Obligor in appropriate
proceedings and against which adequate reserves are being maintained in
accordance with GAAP.
<PAGE> 124
7. EVENTS OF DEFAULT.
The occurrence of an event which under the Credit Agreement would
constitute an Event of Default shall be an Event of Default hereunder (an "EVENT
OF DEFAULT").
8. REMEDIES.
(a) GENERAL REMEDIES. Upon the occurrence of an Event of Default and
during continuation thereof, the Lenders shall have, in addition to the
rights and remedies provided herein, in the Credit Documents, in the
Hedging Agreements or by law (including, but not limited to, the rights
and remedies set forth in the Uniform Commercial Code of the jurisdiction
applicable to the affected Collateral), the rights and remedies of a
secured party under the UCC (regardless of whether the UCC is the law of
the jurisdiction where the rights and remedies are asserted and regardless
of whether the UCC applies to the affected Collateral), and further, the
Agent may, with or without judicial process or the aid and assistance of
others, (i) enter on any premises on which any of the Collateral may be
located and, without resistance or interference by the Obligors, take
possession of the Collateral, (ii) dispose of any Collateral on any such
premises, (iii) require the Obligors to assemble and make available to the
Agent at the expense of the Obligors any Collateral at any place and time
designated by the Agent which is reasonably convenient to both parties,
(iv) remove any Collateral from any such premises for the purpose of
effecting sale or other disposition thereof, and/or (v) without demand and
without advertisement, notice, hearing or process of law, all of which
each of the Obligors hereby waives to the fullest extent permitted by law,
at any place and time or times, sell and deliver any or all Collateral
held by or for it at public or private sale, by one or more contracts, in
one or more parcels, for cash, upon credit or otherwise, at such prices
and upon such terms as the Agent deems advisable, in its sole discretion
(subject to any and all mandatory legal requirements). In addition to all
other sums due the Agent and the Lenders with respect to the Secured
Obligations, the Obligors shall pay the Agent and each of the Lenders all
reasonable documented costs and expenses incurred by the Agent or any such
Lender, including, but not limited to, reasonable attorneys' fees and
court costs, in obtaining or liquidating the Collateral, in enforcing
payment of the Secured Obligations, or in the prosecution or defense of
any action or proceeding by or against the Agent or the Lenders or the
Obligors concerning any matter arising out of or connected with this
Security Agreement, any Collateral or the Secured Obligations, including,
without limitation, any of the foregoing arising in, arising under or
related to a case under the Bankruptcy Code. To the extent the rights of
notice cannot be legally waived hereunder, each Obligor agrees that any
requirement of reasonable notice shall be met if such notice is personally
served on or mailed, postage prepaid, to the Borrower in accordance with
the notice provisions of SECTION 11.1 of the Credit Agreement at least 10
days before the time of sale or other event giving rise to the requirement
of such notice. The Agent and the Lenders shall not be obligated to make
any sale or other disposition of the Collateral regardless of notice
having been given. To the extent permitted by law, any Lender may be a
purchaser at any such sale. To the extent permitted by applicable law,
each of the Obligors hereby waives all of its rights of redemption with
respect to any such sale. Subject to the provisions of applicable law, the
Agent and the Lenders may postpone or cause the postponement of the sale
of all or any portion of the Collateral by announcement at the time and
place of such sale, and such sale may, without further notice, to the
extent permitted by law, be made at the time
<PAGE> 125
and place to which the sale was postponed, or the Agent and the Lenders
may further postpone such sale by announcement made at such time and
place.
(b) REMEDIES RELATING TO ACCOUNTS. Upon the occurrence of an Event
of Default and during the continuation thereof, whether or not the Agent
has exercised any or all of its rights and remedies hereunder, each
Obligor will promptly upon request of the Agent instruct all account
debtors to remit all payments in respect of Accounts to a mailing location
selected by the Agent. In addition, the Agent or its designee may notify
any Obligor's customers and account debtors that the Accounts of such
Obligor have been assigned to the Agent or of the Agent's security
interest therein, and may (either in its own name or in the name of an
Obligor or both) demand, collect (including without limitation by way of a
lockbox arrangement), receive, take receipt for, sell, sue for, compound,
settle, compromise and give acquittance for any and all amounts due or to
become due on any Account, and, in the Agent's discretion, file any claim
or take any other action or proceeding to protect and realize upon the
security interest of the Lenders in the Accounts. Each Obligor
acknowledges and agrees that the Proceeds of its Accounts remitted to or
on behalf of the Agent in accordance with the provisions hereof shall be
solely for the Agent's own convenience and that such Obligor shall not
have any right, title or interest in such Accounts or in any such other
amounts except as expressly provided herein. The Agent and the Lenders
shall have no liability or responsibility to any Obligor for acceptance of
a check, draft or other order for payment of money bearing the legend
"payment in full" or words of similar import or any other restrictive
legend or endorsement or be responsible for determining the correctness of
any remittance. Each Obligor hereby agrees to indemnify the Agent and the
Lenders from and against all liabilities, damages, losses, actions,
claims, judgments, costs, expenses, charges and reasonable attorneys' fees
suffered or incurred by the Agent or the Lenders (each, an "INDEMNIFIED
PARTY") because of the maintenance of the foregoing arrangements except as
relating to or arising out of the gross negligence or willful misconduct
of an Indemnified Party or its officers, employees or agents. In the case
of any investigation, litigation or other proceeding, the foregoing
indemnity shall be effective whether or not such investigation, litigation
or proceeding is brought by an Obligor, its directors, shareholders or
creditors or an Indemnified Party or any other Person or any other
Indemnified Party is otherwise a party thereto.
(c) ACCESS. In addition to the rights and remedies hereunder, upon
the occurrence of an Event of Default and during the continuance thereof,
the Agent shall have the right to enter and remain upon the various
premises of the Obligors without cost or charge to the Agent, and use the
same, together with materials, supplies, books and records of the Obligors
for the purpose of collecting and liquidating the Collateral, or for
preparing for sale and conducting the sale of the Collateral, whether by
foreclosure, auction or otherwise. In addition, the Agent may remove
Collateral, or any part thereof, from such premises and/or any records
with respect thereto, in order to effectively collect or liquidate such
Collateral.
(d) NONEXCLUSIVE NATURE OF REMEDIES. Failure by the Agent or the
Lenders to exercise any right, remedy or option under this Security
Agreement, any other Credit Document, any Hedging Agreement or as provided
by law, or any delay by the Agent or the Lenders in exercising the same,
shall not operate as a waiver of any such right, remedy or option. No
waiver hereunder shall be effective unless it is in writing, signed by the
party against whom such waiver
<PAGE> 126
is sought to be enforced and then only to the extent specifically stated,
which in the case of the Agent or the Lenders shall only be granted as
provided herein. To the extent permitted by law, neither the Agent, the
Lenders, nor any party acting as attorney for the Agent or the Lenders,
shall be liable hereunder for any acts or omissions or for any error of
judgment or mistake of fact or law other than their gross negligence or
willful misconduct hereunder. The rights and remedies of the Agents and
the Lenders under this Security Agreement shall be cumulative and not
exclusive of any other right or remedy which the Agent or the Lenders may
have.
(e) RETENTION OF COLLATERAL. The Agent may, after providing the
notices required by Section 9-505(2) of the UCC or otherwise complying
with the requirements of applicable law of the relevant jurisdiction, to
the extent the Agent is in possession of any of the Collateral, retain the
Collateral in satisfaction of the Secured Obligations. Unless and until
the Agent shall have provided such notices, however, the Agent shall not
be deemed to have retained any Collateral in satisfaction of any Secured
Obligations for any reason.
(f) DEFICIENCY. In the event that the proceeds of any sale,
collection or realization are insufficient to pay all amounts to which the
Agent or the Lenders are legally entitled, the Obligors shall be jointly
and severally liable for the deficiency, together with interest thereon at
the default rate specified in SECTION 3.1 of the Credit Agreement for
Revolving Loans that are Base Rate Loans, together with the costs of
collection and the reasonable fees of any attorneys employed by the Agent
to collect such deficiency. Any surplus remaining after the full payment
and satisfaction of the Secured Obligations shall be returned to the
Obligors or to whomsoever a court of competent jurisdiction shall
determine to be entitled thereto.
9. RIGHTS OF THE AGENT.
(a) POWER OF ATTORNEY. In addition to other powers of attorney
contained herein, each Obligor hereby designates and appoints the Agent,
on behalf of the Lenders, and each of its designees or agents, as
attorney-in-fact of such Obligor, irrevocably and with power of
substitution, with authority to take any or all of the following actions
upon the occurrence and during the continuance of an Event of Default:
(i) to demand, collect, settle, compromise, adjust,
give discharges and releases, all as the Agent may reasonably
determine;
(ii) to commence and prosecute any actions at any
court for the purposes of collecting any Collateral and
enforcing any other right in respect thereof;
(iii) to defend, settle or compromise any action brought and,
in connection therewith, give such discharge or release as the Agent
may deem reasonably appropriate;
(iv) receive, open and dispose of mail addressed to an
Obligor and endorse checks, notes, drafts, acceptances, money
orders, bills of lading,
<PAGE> 127
warehouse receipts or other instruments or documents evidencing
payment, shipment or storage of the goods giving rise to the
Collateral of such Obligor on behalf of and in the name of such
Obligor, or securing, or relating to such Collateral;
(v) sell, assign, transfer, make any agreement in respect
of, or otherwise deal with or exercise rights in respect of, any
Collateral or the goods or services which have given rise thereto,
as fully and completely as though the Agent were the absolute owner
thereof for all purposes;
(vi) adjust and settle claims under any insurance policy
relating thereto;
(vii) execute and deliver all assignments, conveyances,
statements, financing statements, renewal financing statements,
security agreements, affidavits, notices and other agreements,
instruments and documents that the Agent may determine necessary in
order to perfect and maintain the security interests and liens
granted in this Security Agreement and in order to fully consummate
all of the transactions contemplated therein;
(viii) institute any foreclosure proceedings that the
Agent may deem appropriate; and
(ix) do and perform all such other acts and things as the
Agent may reasonably deem to be necessary, proper or convenient in
connection with the Collateral.
This power of attorney is a power coupled with an interest and shall be
irrevocable (i) for so long as any of the Secured Obligations remain
outstanding, any Credit Document or any Hedging Agreement is in effect or
any Letter of Credit shall remain outstanding and (ii) until all of the
Commitments shall have been terminated. The Agent shall be under no duty
to exercise or withhold the exercise of any of the rights, powers,
privileges and options expressly or implicitly granted to the Agent in
this Security Agreement, and shall not be liable for any failure to do so
or any delay in doing so. The Agent shall not be liable for any act or
omission or for any error of judgment or any mistake of fact or law in its
individual capacity or its capacity as attorney-in-fact except acts or
omissions resulting from its gross negligence or willful misconduct. This
power of attorney is conferred on the Agent solely to protect, preserve
and realize upon its security interest in the Collateral.
(b) PERFORMANCE BY THE AGENT OF OBLIGATIONS. If any Obligor fails to
perform any agreement or obligation contained herein, the Agent itself may
perform, or cause performance of, such agreement or obligation, and the
expenses of the Agent incurred in connection therewith shall be payable by
the Obligors on a joint and several basis pursuant to Section 11 hereof.
(c) ASSIGNMENT BY THE AGENT. The Agent may from time to time assign
the Secured Obligations and any portion thereof and/or the Collateral and
any portion thereof, and the assignee
<PAGE> 128
shall be entitled to all of the rights and remedies of the Agent under
this Security Agreement in relation thereto.
(d) THE AGENT'S DUTY OF CARE. Other than the exercise of reasonable
care to assure the safe custody of the Collateral while being held by the
Agent hereunder, the Agent shall have no duty or liability to preserve
rights pertaining thereto, it being understood and agreed that the
Obligors shall be responsible for preservation of all rights in the
Collateral, and the Agent shall be relieved of all responsibility for the
Collateral upon surrendering it or tendering the surrender of it to the
Obligors. The Agent shall be deemed to have exercised reasonable care in
the custody and preservation of the Collateral in its possession if the
Collateral is accorded treatment substantially equal to that which the
Agent accords its own property, which shall be no less than the treatment
employed by a reasonable and prudent agent in the industry, it being
understood that the Agent shall not have responsibility for taking any
necessary steps to preserve rights against any parties with respect to any
of the Collateral.
10. APPLICATION OF PROCEEDS. Upon the occurrence and during the
continuance of an Event of Default, any payments in respect of the Secured
Obligations and any proceeds of the Collateral, when received by the Agent or
any of the Lenders in cash or its equivalent, will be applied in reduction of
the Secured Obligations in the order set forth in SECTION 3.15(b) of the Credit
Agreement, and each Obligor irrevocably waives the right to direct the
application of such payments and proceeds and acknowledges and agrees that the
Agent shall have the continuing and exclusive right to apply and reapply any and
all such payments and proceeds in the Agent's sole discretion, notwithstanding
any entry to the contrary upon any of its books and records.
11. COSTS OF COUNSEL. If at any time hereafter, whether upon the
occurrence of an Event of Default or not, the Agent employs counsel to prepare
or consider amendments, waivers or consents with respect to this Security
Agreement, or to take action or make a response in or with respect to any legal
or arbitral proceeding relating to this Security Agreement or relating to the
Collateral, or to protect the Collateral or exercise any rights or remedies
under this Security Agreement or with respect to the Collateral, then the
Obligors agree to promptly pay upon demand any and all such reasonable
documented costs and expenses of the Agent or the Lenders, all of which costs
and expenses shall constitute Secured Obligations hereunder.
12. CONTINUING AGREEMENT.
(a) This Security Agreement shall be a continuing agreement in every
respect and shall remain in full force and effect so long as any of the
Secured Obligations remain outstanding or any Credit Document or Hedging
Agreement is in effect or any Letter of Credit shall remain outstanding,
and until all of the Commitments thereunder shall have terminated (other
than any obligations with respect to the indemnities and the
representations and warranties set forth in the Credit Documents). Upon
such payment and termination, this Security Agreement shall be
automatically terminated and the Agent and the Lenders shall, upon the
request and at the expense of the Obligors, forthwith release all of its
liens and security interests hereunder and shall execute and deliver all
UCC termination statements and/or other documents reasonably requested by
the
<PAGE> 129
Obligors evidencing such termination. Notwithstanding the foregoing all
releases and indemnities provided hereunder shall survive termination of
this Security Agreement.
(b) This Security Agreement shall continue to be effective or be
automatically reinstated, as the case may be, if at any time payment, in
whole or in part, of any of the Secured Obligations is rescinded or must
otherwise be restored or returned by the Agent or any Lender as a
preference, fraudulent conveyance or otherwise under any bankruptcy,
insolvency or similar law, all as though such payment had not been made;
provided that in the event payment of all or any part of the Secured
Obligations is rescinded or must be restored or returned, all reasonable
costs and expenses (including without limitation any reasonable legal fees
and disbursements) incurred by the Agent or any Lender in defending and
enforcing such reinstatement shall be deemed to be included as a part of
the Secured Obligations.
13. AMENDMENTS; WAIVERS; MODIFICATIONS. This Security Agreement and the
provisions hereof may not be amended, waived, modified, changed, discharged or
terminated except as set forth in SECTION 11.6 of the Credit Agreement.
14. SUCCESSORS IN INTEREST. This Security Agreement shall create a
continuing security interest in the Collateral and shall be binding upon each
Obligor, its successors and assigns and shall inure, together with the rights
and remedies of the Agent and the Lenders hereunder, to the benefit of the Agent
and the Lenders and their successors and permitted assigns; PROVIDED, HOWEVER,
that none of the Obligors may assign its rights or delegate its duties hereunder
without the prior written consent of each Lender or the Required Lenders, as
required by the Credit Agreement. To the fullest extent permitted by law, each
Obligor hereby releases the Agent and each Lender, and its successors and
assigns, from any liability for any act or omission relating to this Security
Agreement or the Collateral, except for any liability arising from the gross
negligence or willful misconduct of the Agent, or such Lender, or its officers,
employees or agents.
15. NOTICES. All notices required or permitted to be given under this
Security Agreement shall be in conformance with SECTION 11.1 of the Credit
Agreement.
16. COUNTERPARTS. This Security Agreement may be executed in any number of
counterparts, each of which where so executed and delivered shall be an
original, but all of which shall constitute one and the same instrument. It
shall not be necessary in making proof of this Security Agreement to produce or
account for more than one such counterpart.
17. HEADINGS. The headings of the sections and subsections hereof are
provided for convenience only and shall not in any way affect the meaning or
construction of any provision of this Security Agreement.
18. GOVERNING LAW; SUBMISSION TO JURISDICTION; VENUE.
(a) THIS SECURITY AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE
PARTIES HEREUNDER SHALL BE GOVERNED BY AND CONSTRUED AND INTERPRETED IN
ACCORDANCE WITH THE LAWS OF THE
<PAGE> 130
STATE OF NORTH CAROLINA. Any legal action or proceeding with respect to
this Security Agreement may be brought in the courts of the State of North
Carolina, or of the United States for the Western District of North
Carolina, and, by execution and delivery of this Security Agreement, each
Obligor hereby irrevocably accepts for itself and in respect of its
property, generally and unconditionally, the jurisdiction of such courts.
Each Obligor further irrevocably consents to the service of process out of
any of the aforementioned courts in any such action or proceeding by the
mailing of copies thereof by registered or certified mail, postage
prepaid, to it at the address for notices pursuant to SECTION 11.1 of the
Credit Agreement, such service to become effective 30 days after such
mailing. Nothing herein shall affect the right of the Agent to serve
process in any other manner permitted by law or to commence legal
proceedings or to otherwise proceed against any Obligor in any other
jurisdiction.
(b) Each Obligor hereby irrevocably waives any objection which it
may now or hereafter have to the laying of venue of any of the aforesaid
actions or proceedings arising out of or in connection with this Security
Agreement brought in the courts referred to in subsection (a) hereof and
hereby further irrevocably waives and agrees not to plead or claim in any
such court that any such action or proceeding brought in any such court
has been brought in an inconvenient forum.
19. WAIVER OF JURY TRIAL. TO THE EXTENT PERMITTED BY APPLICABLE LAW, EACH
OF THE PARTIES TO THIS SECURITY AGREEMENT HEREBY IRREVOCABLY WAIVES ALL RIGHT TO
TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR
RELATING TO THIS SECURITY AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.
20. SEVERABILITY. If any provision of any of the Security Agreement is
determined to be illegal, invalid or unenforceable, such provision shall be
fully severable and the remaining provisions shall remain in full force and
effect and shall be construed without giving effect to the illegal, invalid or
unenforceable provisions.
21. ENTIRETY. This Security Agreement, the other Credit Documents and the
Hedging Agreements represent the entire agreement of the parties hereto and
thereto, and supersede all prior agreements and understandings, oral or written,
if any, including any commitment letters or correspondence relating to the
Credit Documents, the Hedging Agreements or the transactions contemplated herein
and therein.
22. SURVIVAL. All representations and warranties of the Obligors hereunder
shall survive the execution and delivery of this Security Agreement, the other
Credit Documents and the Hedging Agreements, the delivery of the Notes and the
making of the Loans and the issuance of the Letters of Credit under the Credit
Agreement.
23. OTHER SECURITY. To the extent that any of the Secured Obligations are
now or hereafter secured by property other than the Collateral (including,
without limitation, real property and securities owned by an Obligor), or by a
guarantee, endorsement or property of any other Person, then the Agent
<PAGE> 131
and the Lenders shall have the right to proceed against such other property,
guarantee or endorsement upon the occurrence of any Event of Default, and the
Agent and the Lenders have the right, in their sole discretion, to determine
which rights, security, liens, security interests or remedies the Agent and the
Lenders shall at any time pursue, relinquish, subordinate, modify or take with
respect thereto, without in any way modifying or affecting any of them or any of
the Agent's and the Lenders' rights or the Secured Obligations under this
Security Agreement, under any other of the Credit Documents or under any Hedging
Agreement.
24. JOINT AND SEVERAL OBLIGATIONS OF OBLIGORS.
(a) Each of the Obligors is accepting joint and several liability
hereunder in consideration of the financial accommodation to be provided
by the Lenders under the Credit Agreement, for the mutual benefit,
directly and indirectly, of each of the Obligors and in consideration of
the undertakings of each of the Obligors to accept joint and several
liability for the obligations of each of them.
(b) Each of the Obligors jointly and severally hereby irrevocably
and unconditionally accepts, not merely as a surety but also as a
co-debtor, joint and several liability with the other Obligors with
respect to the payment and performance of all of the Secured Obligations
arising under this Security Agreement, the other Credit Documents and the
Hedging Agreements, it being the intention of the parties hereto that all
the Obligations shall be the joint and several obligations of each of the
Obligors without preferences or distinction among them.
(c) Notwithstanding any provision to the contrary contained herein
or in any other of the Credit Documents, to the extent the obligations of
a Guarantor shall be adjudicated to be invalid or unenforceable for any
reason (including, without limitation, because of any applicable state or
federal law relating to fraudulent conveyances or transfers) then the
obligations of each Guarantor hereunder shall be limited to the maximum
amount that is permissible under applicable law (whether federal or state
and including, without limitation, the Bankruptcy Code).
25. RIGHTS OF REQUIRED LENDERS. All rights of the Agent hereunder, if
not exercised by the Agent, may be exercised by the Required Lenders.
[remainder of page intentionally left blank]
<PAGE> 132
Each of the parties hereto has caused a counterpart of this Security
Agreement to be duly executed and delivered as of the date first above written.
BORROWER: SIMONDS INDUSTRIES INC.,
- --------- a [DELAWARE] corporation
By: _______________________________
Title: ____________________________
GUARANTORS:
- ----------- ___________________________________
By: _______________________________
Name: _____________________________
Title: ____________________________
___________________________________
By: _______________________________
Name: _____________________________
Title: ____________________________
___________________________________
By: _______________________________
Name: _____________________________
Title: ____________________________
Accepted and agreed to in Charlotte, North Carolina as of the date first
above written.
FIRST UNION NATIONAL BANK,
Agent
By: _______________________________
Name: _____________________________
Title: ____________________________
<PAGE> 133
SCHEDULE 5(f)(i)
NOTICE
OF
GRANT OF SECURITY INTEREST
IN
COPYRIGHTS
United States Copyright Office
Gentlemen:
Please be advised that pursuant to the Security Agreement dated as of July
2, 1998 (as the same may be amended, modified, extended or restated from time to
time, the "SECURITY AGREEMENT") by and among the Obligors party thereto (each an
"OBLIGOR" and collectively, the "OBLIGORS") and First Union National Bank, as
Agent (the "AGENT") for the lenders referenced therein (the "LENDERS"), the
undersigned Obligor has granted a continuing security interest in and continuing
lien upon, the copyrights and copyright applications shown below to the Agent
for the ratable benefit of the Lenders:
COPYRIGHTS
Date of
Copyright No. Description of Copyright Copyright
------------- ------------------------ ---------
COPYRIGHT APPLICATIONS
Copyright Description of Copyright Date of Copyright
Applications No. Applied for Applications
---------------- ----------- ------------
<PAGE> 134
The Obligors and the Agent, on behalf of the Lenders, hereby acknowledge
and agree that the security interest in the foregoing copyrights and copyright
applications (i) may only be terminated in accordance with the terms of the
Security Agreement and (ii) is not to be construed as an assignment of any
copyright or copyright application.
Very truly yours,
__________________________________
[Obligor]
By: ______________________________
Name: ____________________________
Title: ___________________________
Acknowledged and Accepted:
FIRST UNION NATIONAL BANK,
as Agent
By: ___________________________
Name: _________________________
Title: ________________________
<PAGE> 135
SCHEDULE 5(f)(ii)
NOTICE
OF
GRANT OF SECURITY INTEREST
IN
PATENTS
United States Patent and Trademark Office
Gentlemen:
Please be advised that pursuant to the Security Agreement dated as of July
2, 1998 (the "SECURITY AGREEMENT") by and among the Obligors party thereto (each
an "OBLIGOR" and collectively, the "OBLIGORS") and First Union National Bank, as
Agent (the "AGENT") for the lenders referenced therein (the "Lenders"), the
undersigned Obligor has granted a continuing security interest in and continuing
lien upon, the patents and patent applications shown below to the Agent for the
ratable benefit of the Lenders:
PATENTS
Description of Patent Date of
Patent No. Item Patent
---------- -------------------- ------
PATENT APPLICATIONS
Patent Description of Patent Date of Patent
Applications No. Applied For Applications
---------------- ----------- ------------
<PAGE> 136
The Obligors and the Agent, on behalf of the Lenders, hereby acknowledge
and agree that the security interest in the foregoing patents and patent
applications (i) may only be terminated in accordance with the terms of the
Security Agreement and (ii) is not to be construed as an assignment of any
patent or patent application.
Very truly yours,
__________________________________
[Obligor]
By: ______________________________
Name: ____________________________
Title: ___________________________
Acknowledged and Accepted:
FIRST UNION NATIONAL BANK,
as Agent
By: _____________________________
Name: ___________________________
Title: __________________________
<PAGE> 137
SCHEDULE 5(f)(iii)
NOTICE
OF
GRANT OF SECURITY INTEREST
IN
TRADEMARKS
United States Patent and Trademark Office
Gentlemen:
Please be advised that pursuant to the Security Agreement dated as of July
2, 1998 (the "SECURITY AGREEMENT") by and among the Obligors party thereto (each
an "OBLIGOR" and collectively, the "OBLIGORS") and First Union National Bank, as
Agent (the "AGENT") for the lenders referenced therein (the "Lenders"), the
undersigned Obligor has granted a continuing security interest in and continuing
lien upon, the trademarks and trademark applications shown below to the Agent
for the ratable benefit of the Lenders:
TRADEMARKS
Description of Trademark Date of
Trademark No. Item Trademark
------------- ---- ---------
TRADEMARK APPLICATIONS
Trademark Description of Trademark Date of Trademark
Applications No. Applied For Applications
---------------- ----------- ------------
<PAGE> 138
The Obligors and the Agent, on behalf of the Lenders, hereby acknowledge
and agree that the security interest in the foregoing trademarks and trademark
applications (i) may only be terminated in accordance with the terms of the
Security Agreement and (ii) is not to be construed as an assignment of any
trademark or trademark application.
Very truly yours,
__________________________________
[Obligor]
By: ______________________________
Name: ____________________________
Title: ___________________________
Acknowledged and Accepted:
FIRST UNION NATIONAL BANK,
as Agent
By: ___________________________
Name: _________________________
Title: ________________________
<PAGE> 139
EXHIBIT 2.1(b)(i)
FORM OF NOTICE OF BORROWING
First Union National Bank,
as Agent for the Lenders
One First Union Center, NC-0680
301 South College Street
Charlotte, North Carolina 28288-0608
Attn: Syndication Agency Services
Ladies and Gentlemen:
The undersigned, SIMONDS INDUSTRIES INC. (the "BORROWER"), refers to the
Credit Agreement dated as of July 2, 1998 (as amended, modified, restated or
supplemented from time to time, the "CREDIT AGREEMENT"), among the Borrower, the
Guarantors, the Lenders and First Union National Bank, as Agent. Capitalized
terms used herein and not otherwise defined herein shall have the meanings
assigned to such terms in the Credit Agreement. The Borrower hereby gives notice
pursuant to Section 3.2 of the Credit Agreement that it requests a Revolving
Loan advance under the Credit Agreement, and in connection therewith sets forth
below the terms on which such Loan advance is requested to be made:
(A) Date of Borrowing (which is a Business Day) _______________________
(B) Principal Amount of Borrowing _______________________
(C) Interest rate basis _______________________
(D) Interest Period and the last day thereof _______________________
In accordance with the requirements of Section 5.2, the Borrower hereby
reaffirms the representations and warranties set forth in the Credit Agreement
as provided in subsection (b) of such Section, and confirms that the matters
referenced in subsections (b), (c) and (d) of such Section, are true and
correct.
SIMONDS INDUSTRIES INC.
By: _____________________
Name: ___________________
Title: __________________
<PAGE> 140
EXHIBIT 2.1(b)(iii)
NOTICE OF ACCOUNT DESIGNATION
Dated July 2, 1998
First Union National Bank
One First Union Center, NC-0680
301 South College Street
Charlotte, North Carolina 28288-0608
Attn: Syndication Agency Services
Ladies and Gentlemen:
This Notice of Account Designation is delivered to you by Simonds
Industries Inc. (the "Company"), a corporation organized under the laws of
Delaware, under Section 2.1 of the Credit Agreement dated as of July 2, 1998 (as
amended, restated or otherwise modified, the "Credit Agreement") by and among
the Borrower party thereto, the Guarantors party thereto, the Lenders party
thereto and First Union National Bank, as Agent.
The Agent is hereby authorized to disburse all Loan proceeds into the
following account, unless the Company shall designate, in writing to the Agent,
one or more other accounts:
Name of Bank:____________________________________
ABA Routing Number:______________________________
Account Number:__________________________________
Notwithstanding the foregoing, on the closing date of the Credit
Agreement, funds borrowed under the Credit Agreement shall be sent to the
institutions and/or persons designated on the attached payment instructions.
IN WITNESS WHEREOF, the undersigned has executed this Notice of Account
Designation this 2nd day of July, 1998
[CORPORATE SEAL] Simonds Industries Inc.
By:_____________________________
Name:
Title:
<PAGE> 141
EXHIBIT 2.1(e)
FORM OF REVOLVING NOTE
$_________________ July 2, 1998
FOR VALUE RECEIVED, SIMONDS INDUSTRIES INC., a [DELAWARE] corporation (the
"BORROWER"), hereby promises to pay to the order of __________________________,
its successors and assigns (the "LENDER"), at the office of First Union National
Bank, as Agent (the "AGENT"), at ____________________, Charlotte, North Carolina
282__ (or at such other place or places as the holder hereof may designate), at
the times set forth in the Credit Agreement dated as of the date hereof among
the Borrower, the Guarantors, the Lenders and the Agent (as it may be as
amended, modified, restated or supplemented from time to time, the "CREDIT
AGREEMENT"; all capitalized terms not otherwise defined herein shall have the
meanings set forth in the Credit Agreement), but in no event later than the
Maturity Date, in Dollars and in immediately available funds, the principal
amount of ________________________ DOLLARS ($____________) or, if less than such
principal amount, the aggregate unpaid principal amount of all Revolving Loans
made by the Lender to the Borrower pursuant to the Credit Agreement, and to pay
interest from the date hereof on the unpaid principal amount hereof, in like
money, at said office, on the dates and at the rates selected in accordance with
Section 2.1(d) of the Credit Agreement.
Upon the occurrence and during the continuance of an Event of Default, the
balance outstanding hereunder shall bear interest as provided in Section 3.1 of
the Credit Agreement. Further, in the event the payment of all sums due
hereunder is accelerated under the terms of the Credit Agreement, this Note, and
all other indebtedness of the Borrower to the Lender shall become immediately
due and payable, without presentment, demand, protest or notice of any kind, all
of which are hereby waived by the Borrower.
In the event this Note is not paid when due at any stated or accelerated
maturity, the Borrower agrees to pay, in addition to the principal and interest,
all costs of collection, including reasonable attorneys' fees.
All borrowings evidenced by this Note and all payments and prepayments of
the principal hereof and interest hereon and the respective dates thereof shall
be endorsed by the holder hereof on SCHEDULE A attached hereto and incorporated
herein by reference, or on a continuation thereof which shall be attached hereto
and made a part hereof; PROVIDED, HOWEVER, that any failure to endorse such
information on such schedule or continuation thereof shall not in any manner
affect the obligation of the Borrower to make payments of principal and interest
in accordance with the terms of this Note.
<PAGE> 142
This Note and the Loans evidenced hereby may be transferred in whole or in
part only by registration of such transfer on the Register maintained by or on
behalf of the Borrower as provided in Section 11.3(c) of the Credit Agreement.
IN WITNESS WHEREOF, the Borrower has caused this Note to be duly executed
by its duly authorized officer as of the day and year first above written.
SIMONDS INDUSTRIES INC.
By: __________________________
Name: ________________________
Title: _______________________
<PAGE> 143
SCHEDULE A TO THE
REVOLVING NOTE
OF ______________
DATED July 2, 1998
Unpaid Name of
Type Principal Person
of Interest Payments Balance Making
Date Loan Period Principal Interof of Note Notation
- ---- ---- ------ --------- ------- ------- --------
<PAGE> 144
EXHIBIT 3.2
FORM OF NOTICE OF EXTENSION/CONVERSION
First Union National Bank,
as Agent for the Lenders
______________________
______________________
______________________
Charlotte, North Carolina 282__
Attention: _____________
Ladies and Gentlemen:
The undersigned, SIMONDS INDUSTRIES INC. (the "BORROWER"), refers to the
Credit Agreement dated as of July 2, 1998 (as amended, modified, restated or
supplemented from time to time, the "CREDIT AGREEMENT"), among the Borrower, the
Guarantors, the Lenders and First Union National Bank, as Agent. Capitalized
terms used herein and not otherwise defined herein shall have the meanings
assigned to such terms in the Credit Agreement. The Borrower hereby gives notice
pursuant to Section 3.2 of the Credit Agreement that it requests an extension or
conversion of a Revolving Loan outstanding under the Credit Agreement, and in
connection therewith sets forth below the terms on which such extension or
conversion is requested to be made:
(A) Date of Extension or Conversion
(which is the last day of the
the applicable Interest Period) _______________________
(B) Principal Amount of Extension or Conversion _______________________
(C) Interest rate basis _______________________
(D) Interest Period and the last day thereof _______________________
In accordance with the requirements of Section 5.2, the Borrower hereby
reaffirms the representations and warranties set forth in the Credit Agreement
as provided in subsection (b) of such Section, and confirms that the matters
referenced in subsections (c), (d), (e) and (f) of such Section, are true and
correct.
SIMONDS INDUSTRIES INC.
By: __________________________
Name: ________________________
Title: _______________________
<PAGE> 145
EXHIBIT 7.1(d)
FORM OF OFFICER'S COMPLIANCE CERTIFICATE
For the fiscal quarter ended _________________, 19___.
I, ______________________, [Title] of SIMONDS INDUSTRIES INC. (the
"BORROWER") hereby certify that, to the best of my knowledge and belief, with
respect to that certain Credit Agreement dated as of July 2, 1998 (as amended,
modified, restated or supplemented from time to time, the "CREDIT AGREEMENT";
all of the defined terms in the Credit Agreement are incorporated herein by
reference) among the Borrower, the Guarantors, the Lenders and First Union
National Bank, as Agent:
a. The company-prepared financial statements which accompany this
certificate are true and correct in all material respects and have
been prepared in accordance with GAAP applied on a consistent basis,
subject to changes resulting from normal year-end audit adjustments.
b. Since ___________ (the date of the last similar certification, or,
if none, the Closing Date) no Default or Event of Default has
occurred under the Credit Agreement; and
Delivered herewith are detailed calculations demonstrating compliance by
the Credit Parties with the financial covenants contained in Section 7.11 of the
Credit Agreement as of the end of the fiscal period referred to above.
This ______ day of ___________, 19__.
SIMONDS INDUSTRIES INC.
By: ___________________________
Name: _________________________
Title: ________________________
<PAGE> 146
ATTACHMENT TO OFFICER'S CERTIFICATE
COMPUTATION OF FINANCIAL COVENANTS
<PAGE> 147
EXHIBIT 7.12
FORM OF JOINDER AGREEMENT
THIS JOINDER AGREEMENT (the "AGREEMENT"), dated as of _____________, 19__,
is by and between _____________________, a ___________________ (the
"SUBSIDIARY"), and FIRST UNION NATIONAL BANK, in its capacity as Agent under
that certain Credit Agreement (as it may be amended, modified, restated or
supplemented from time to time, the "CREDIT AGREEMENT"), dated as of July 2,
1998, by and among SIMONDS INDUSTRIES INC., a [DELAWARE] corporation (the
"BORROWER"), the Guarantors, the Lenders and First Union National Bank, as
Agent. All of the defined terms in the Credit Agreement are incorporated herein
by reference.
The Subsidiary is an Additional Credit Party, and, consequently, the
Credit Parties are required by Section 7.12 of the Credit Agreement to cause the
Subsidiary to become a "GUARANTOR".
Accordingly, the Subsidiary hereby agrees as follows with the Agent, for
the benefit of the Lenders:
1. The Subsidiary hereby acknowledges, agrees and confirms that, by its
execution of this Agreement, the Subsidiary will be deemed to be a party to the
Credit Agreement and a "Guarantor" for all purposes of the Credit Agreement, and
shall have all of the obligations of a Guarantor thereunder as if it had
executed the Credit Agreement. The Subsidiary hereby ratifies, as of the date
hereof, and agrees to be bound by, all of the terms, provisions and conditions
applicable to the Guarantors contained in the Credit Agreement. Without limiting
the generality of the foregoing terms of this paragraph 1, the Subsidiary hereby
(i) jointly and severally together with the other Guarantors, guarantees to each
Lender and the Agent, as provided in Section 4 of the Credit Agreement, the
prompt payment and performance of the Credit Party Obligations in full when due
(whether at stated maturity, as a mandatory prepayment, by acceleration or
otherwise) strictly in accordance with the terms thereof.
2. The Subsidiary hereby acknowledges, agrees and confirms that, by its
execution of this Agreement, the Subsidiary will be deemed to be a party to the
Security Agreement, and shall have all the obligations of an "Obligor" (as such
term is defined in the Security Agreement) thereunder as if it had executed the
Security Agreement. The Subsidiary hereby ratifies, as of the date hereof, and
agrees to be bound by, all of the terms, provisions and conditions contained in
the Security Agreement. Without limiting generality of the foregoing terms of
this paragraph 2, the Subsidiary hereby grants to the Agent, for the benefit of
the Lenders [and the Senior Noteholders], a continuing security interest in, and
a right of set off against any and all right, title and interest of the
Subsidiary in and to the Collateral (as such term is defined in Section 2 of the
Security Agreement) of the Subsidiary. The Subsidiary hereby represents and
warrants to the Agent that:
(i) The Subsidiary's chief executive office and chief place of
business are (and for the prior four months have been) located at the
locations set forth on SCHEDULE 1 attached hereto and the Subsidiary keeps
its books and records at such locations.
<PAGE> 148
(ii) The type of Collateral owned by the Subsidiary and the
location of all Collateral owned by the Subsidiary is as shown on SCHEDULE
2 attached hereto.
(iii) The Subsidiary's legal name is as shown in this Agreement and
the Subsidiary has not in the past four months changed its name, been
party to a merger, consolidation or other change in structure or used any
tradename except as set forth in SCHEDULE 3 attached hereto.
(iv) The patents and trademarks listed on SCHEDULE 4 attached
hereto constitute all of the registrations and applications for the
patents and trademarks owned by the Subsidiary.
3. The Subsidiary hereby acknowledges, agrees and confirms that, by its
execution of this Agreement, the Subsidiary will be deemed to be a party to the
Pledge Agreement, and shall have all the obligations of a "Pledgor" thereunder
as if it had executed the Pledge Agreement. The Subsidiary hereby ratifies, as
of the date hereof, and agrees to be bound by, all the terms, provisions and
conditions contained in the Pledge Agreement. Without limiting the generality of
the foregoing terms of this paragraph 3, the Subsidiary hereby pledges and
assigns to the Agent, for the benefit of the Lenders [and the Senior
Noteholders], and grants to the Agent, for the benefit of the Lenders [and the
Senior Noteholders], a continuing security interest in any and all right, title
and interest of the Subsidiary in and to Pledged Shares (as such term is defined
in Section 2 of the Pledge Agreement) listed on SCHEDULE 5 attached hereto and
the other Pledged Collateral (as such term is defined in Section 2 of the Pledge
Agreement).
4. If the Subsidiary is not incorporated or organized under the laws of
any State of the United States or the District of Columbia, then the Subsidiary
hereby agrees as follows:
(i) (A) Without limiting the generality of subsections (a) and (b)
of Section 11.10 of the Credit Agreement, the Subsidiary agrees that any
controversy or claim with respect to it arising out of or relating to the
Credit Agreement or the other Credit Documents may, at the option of the
Agent and the Lenders, be settled immediately by submitting the same to
binding arbitration in the City of Charlotte, North Carolina (or such
other place as the parties may agree) in accordance with the Commercial
Arbitration Rules then obtaining of the American Arbitration Association.
Upon the request and submission of any controversy or claim for
arbitration hereunder, the Agent shall give the Subsidiary not less than
45 days written notice of the request for arbitration, the nature of the
controversy or claim, and the time and place set for arbitration. The
Subsidiary agrees that such notice is reasonable to enable it sufficient
time to prepare and present its case before the arbitration panel.
Judgment on the award rendered by the arbitration panel may be entered in
any court in which any action could have been brought or maintained
pursuant to subparagraph (ii) below, including without limitation any
court of the State of North Carolina or any Federal court sitting in the
State of North Carolina. The expenses of arbitration shall be paid by the
Subsidiary.
(B) The provisions of subparagraph (A) above are intended to
comply with the requirements of the Convention on the Recognition and
Enforcement of Foreign Arbitral Awards (the "Convention"). To the extent
that any provisions of such subparagraph (A) are not
<PAGE> 149
consistent with or fail to conform to the requirements set out in the
Convention, such subparagraph (A) shall be deemed amended to conform to
the requirements of the Convention.
(C) The Subsidiary hereby specifically consents and submits to the
jurisdiction of the courts of the State of North Carolina and courts of
the United States located in the State of North Carolina for purposes of
entry of a judgment or arbitration award entered by the arbitration panel.
(D) The Subsidiary hereby irrevocably appoints ________________,
with an address on the date hereof at __________________________________
(the "North Carolina Process Agent"), as process agent in its name, place
and stead to receive and forward service of any and all writs, summonses
and other legal process in any suit, action or proceeding brought in the
State of North Carolina, agrees that such service in any such suit, action
or proceeding may be made upon the North Carolina Process Agent and agrees
to take all such action as may be necessary to continue said appointment
in full force and effect or to appoint another agent so that the
Subsidiary will at all times have an agent in the State of North Carolina
for service of process for the above purposes.
(ii) The guarantee of the Subsidiary pursuant to the Credit
Agreement is (in part) an international transaction in which payment of
dollars in Charlotte, North Carolina, is of the essence, and dollars shall
be the currency of account in all events. The payment obligation of the
Subsidiary shall not be discharged by an amount paid in another currency
or in another place, whether pursuant to a judgment or otherwise, to the
extent that the amount so paid on prompt conversion to dollars and
transfer to Charlotte, North Carolina, under normal banking procedures
does not yield the amount of dollars in Charlotte, North Carolina due
hereunder. In the event that any payment by the Subsidiary, whether
pursuant to a judgment or otherwise, upon conversion and transfer does not
result in payment of such amount of dollars in Charlotte, North Carolina,
the Agent and the Lenders shall have a separate cause of action against
the Subsidiary for the additional amount necessary to yield the amount due
and owing to the Agent and the Lenders.]
5. The address of the Subsidiary for purposes of all notices and other
communications is ____________________, ____________________________, Attention
of ______________ (Facsimile No. ____________).
6. The Subsidiary hereby waives acceptance by the Agent and the Lenders
of the guaranty by the Subsidiary under Section 4 of the Credit Agreement upon
the execution of this Agreement by the Subsidiary.
7. This Agreement may be executed in two or more counterparts, each of
which shall constitute an original but all of which when taken together shall
constitute one contract.
8. This Agreement shall be governed by and construed and interpreted in
accordance with the laws of the State of North Carolina.
<PAGE> 150
IN WITNESS WHEREOF, the Subsidiary has caused this Joinder Agreement to be
duly executed by its authorized officers, and the Agent, for the benefit of the
Lenders, has caused the same to be accepted by its authorized officer, as of the
day and year first above written.
[SUBSIDIARY]
By:_____________________________________
Name: __________________________________
Title: _________________________________
Acknowledged and accepted:
FIRST UNION NATIONAL BANK, as Agent
By:_____________________________________
Name: __________________________________
Title: _________________________________
<PAGE> 151
SCHEDULE 1
TO FORM OF JOINDER AGREEMENT
[Chief Executive Office and
Chief Place of Business of Subsidiary]
<PAGE> 152
SCHEDULE 2
TO FORM OF JOINDER AGREEMENT
[Types and Locations of Collateral]
<PAGE> 153
SCHEDULE 3
TO FORM OF JOINDER AGREEMENT
[Tradenames]
<PAGE> 154
SCHEDULE 4
TO FORM OF JOINDER AGREEMENT
[Patents and Trademarks]
<PAGE> 155
SCHEDULE 5
TO FORM OF JOINDER AGREEMENT
[Pledged Shares]
<PAGE> 156
EXHIBIT 11.3(b)
FORM OF ASSIGNMENT AND ACCEPTANCE
Reference is made to the Credit Agreement dated as of July 2, 1998, as
amended and modified from time to time thereafter (the "CREDIT Agreement") among
Simonds Industries Inc., the other Credit Parties party thereto, the Lenders
party thereto and First Union National Bank, as Agent. Terms defined in the
Credit Agreement are used herein with the same meanings.
The "Assignor" and the "Assignee" referred to on Schedule 1 agree as
follows:
1. The Assignor hereby sells and assigns to the Assignee, without
recourse and without representation or warranty except as expressly set forth
herein, and the Assignee hereby purchases and assumes from the Assignor, an
interest in and to the Assignor's rights and obligations under the Credit
Agreement and the other Credit Documents as of the date hereof equal to the
percentage interest specified on Schedule 1 of all outstanding rights and
obligations under the Credit Agreement and the other Credit Documents. After
giving effect to such sale and assignment, the Assignee's Commitment and the
amount of the Loans owing to the Assignee will be as set forth on Schedule 1.
2. The Assignor (i) represents and warrants that it is the legal and
beneficial owner of the interest being assigned by it hereunder and that such
interest is free and clear of any adverse claim; (ii) makes no representation or
warranty and assumes no responsibility with respect to any statements,
warranties or representations made in or in connection with the Credit Documents
or the execution, legality, validity, enforceability, genuineness, sufficiency
or value of the Credit Documents or any other instrument or document furnished
pursuant thereto; (iii) makes no representation or warranty and assumes no
responsibility with respect to the financial condition of any Credit Party or
the performance or observance by any Credit Party of any of its obligations
under the Credit Documents or any other instrument or document furnished
pursuant thereto; and (iv) attaches the Notes held by the Assignor and requests
that the Agent exchange such Notes for new Notes payable to the order of the
Assignee in an amount equal to the Commitment assumed by the Assignee pursuant
hereto and to the Assignor in an amount equal to the Commitment retained by the
Assignor, if any, as specified on Schedule 1.
<PAGE> 157
3. The Assignee (i) confirms that it has received a copy of the Credit
Agreement, together with copies of the financial statements referred to in
Section 7.1 thereof and such other documents and information as it has deemed
appropriate to make its own credit analysis and decision to enter into this
Assignment and Acceptance; (ii) agrees that it will, independently and without
reliance upon the Agent, the Assignor or any other Lender and based on such
documents and information as it shall deem appropriate at the time, continue to
make its own credit decisions in taking or not taking action under the Credit
Agreement; (iii) confirms that it is an Eligible Assignee; (iv) appoints and
authorizes the Agent to take such action as agent on its behalf and to exercise
such powers and discretion under the Credit Agreement as are delegated to the
Agent by the terms thereof, together with such powers and discretion as are
reasonably incidental thereto; (v) agrees that it will perform in accordance
with their terms all of the obligations that by the terms of the Credit
Agreement are required to be performed by it as a Lender; and (vi) attaches any
U.S. Internal Revenue Service or other forms required under Section 3.11.
4. Following the execution of this Assignment and Acceptance, it will
be delivered to the Agent for acceptance and recording by the Agent. The
effective date for this Assignment and Acceptance (the "EFFECTIVE Date") shall
be the date of acceptance hereof by the Agent, unless otherwise specified on
Schedule 1.
5. Upon such acceptance and recording by the Agent, as of the Effective
Date, (i) the Assignee shall be a party to the Credit Agreement and, to the
extent provided in this Assignment and Acceptance, have the rights and
obligations of a Lender thereunder and (ii) the Assignor shall, to the extent
provided in this Assignment and Acceptance, relinquish its rights and be
released from its obligations under the Credit Agreement.
6. Upon such acceptance and recording by the Agent, from and after the
Effective Date, the Agent shall make all payments under the Credit Agreement and
the Notes in respect of the interest assigned hereby (including, without
limitation, all payments of principal, interest and commitment fees with respect
thereto) to the Assignee. The Assignor and Assignee shall make all appropriate
adjustments in payments under the Credit Agreement and the Notes for periods
prior to the Effective Date directly between themselves.
7. This Assignment and Acceptance shall be governed by, and construed
in accordance with, the laws of the State of North Carolina.
8. This Assignment and Acceptance may be executed in any number of
counterparts and by different parties hereto in separate counterparts, each of
which when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement. Delivery of an executed
counterpart of Schedule 1 to this Assignment and Acceptance by telecopier shall
be effective as delivery of a manually executed counterpart of this Assignment
and Acceptance.
<PAGE> 158
IN WITNESS WHEREOF, the Assignor and the Assignee have caused this
Assignment and Acceptance to be executed by their officers thereunto duly
authorized as of the date hereof.
____________________, as Assignor
By:_____________________________________
Name: __________________________________
Title: _________________________________
_____________________, as Assignee
By:_____________________________________
Name: __________________________________
Title: _________________________________
Notice address of Assignee:
[Assignee]
Attn: __________________________________
Telephone: (___) _______________________
Telecopy: (___) ________________________
CONSENTED TO:
FIRST UNION NATIONAL BANK, *
as Agent
By:_____________________________________
Name: __________________________________
Title: _________________________________
SIMONDS INDUSTRIES INC.
By:_____________________________________
Name: __________________________________
Title: _________________________________
- --------
* Required if the Assignee is an Eligible Assignee solely by reason of
clause (iii) of the definition of "Eligible Assignee."
<PAGE> 159
SCHEDULE 1
to
ASSIGNMENT AND ACCEPTANCE
(a) Date of Assignment:
(b) Legal Name of Assignor:
(c) Legal Name of Assignee:
(d) Effective Date of Assignment :
(e) Revolving Commitment Percentage Assigned
(expressed as a percentage set forth to at
least 8 decimals) %
(f) Revolving Commitment Percentage of Assignee
after giving effect to this Assignment and
Acceptance as of the Effective Date (set forth
to at least 8 decimals) %
(g) Revolving Commitment Percentage of Assignor
after giving effect to this Assignment and
Acceptance as of the Effective Date (set forth
to at least 8 decimals) %
(h) Revolving Committed Amount as of Effective Date $_____________
(i) Dollar Amount of Assignor's Revolving Commitment
Percentage as of the Effective Date (the amount
set forth in (h) multiplied by the percentage
set forth in (g)) $_____________
(j) Dollar Amount of Assignee's Revolving Commitment
Percentage as of the Effective Date (the amount
set forth in (h) multiplied by the percentage
set forth in (f)) $_____________
<PAGE> 1
Exhibit 4.4
CREDIT AGREEMENT
dated February 23, 1993
relating to
DM 4,200,000 Term Loan
DM 5,500,000 Working Capital Line
between
WESPA Metallsagenfabrik Simonds Industries GmbH
as Borrower
and
The First National Bank of Boston
Zweigniederlassung Frankfurt
as Lender
- --------------------------------------------------------------------------------
HENGELER MUELLER WEITZEL WIRTZ
Frankfurt am Main
<PAGE> 2
THIS AGREEMENT is made on February 23, 1993 between
(1) WESPA Metallsagenfabrik Simonds Industries GmbH, Lochmuhle 3, 3509
Spangenberg, registered in the Commercial Register of the Lower
District Court (Amtsgericht) Melsungen under No. HRB 1321 (the
"Borrower"); and
(2) The First National Bank of Boston Zweignieder-lassung Frankfurt,
Friedrich-Ebert-Anlage 2-14 (City-Haus), 6000 Frankfurt am Main (the
"Bank").
THE PARTIES AGREE AS FOLLOWS:
1. DEFINITIONS
"AS-IF-OPENING-BALANCE-SHEET" means the As-If-Opening-Balance-Sheet
prepared in accordance with GAAP and correctly translated from the
"Als-Ob-Eroffnungsbilanz" as of the Balance Sheet Date prepared by Arthur
Andersen & Co. GmbH Wirtschafts-prufungsgesellschaft
Steuerberatungsgesellschaft, Frankfurt am Main.
"BALANCE SHEET DATE" means January 1, 1992 which is the date of the
As-If-Opening-Balance-Sheet of the Borrower.
"BANKING DAY" means any day on which banks are open for business in
Frankfurt am Main.
"BORROWING BASE REPORT" means a report with respect to a Borrowing Base
of the Borrower in the form of SCHEDULE 2.
"BORROWING BASE" means, at any time of determination, an amount equal
to the sum of the following: (a) eighty percent (80 %) of the Eligible
Receivables, plus (b) fifty percent (50 %) of the Eligible Inventory provided
that the maximum amount of 50 % of Eligible Inventory to be taken into account
for calculating the Borrowing Base shall be DM 2,250,000.
"CLOSING FEE" means the fee in the amount of U.S.$ 30,000 payable by
the Borrower to The First National Bank of Boston, Boston Office, Eastern
Commercial III, and to be deducted by the Bank from the disbursements to be made
on the Disbursement Date.
"CONSOLIDATED TANGIBLE NET WORTH" means, at any date as of which the
amount thereof shall be determined, the consolidated total assets of the
Borrower and its Subsidiaries (carried on the books and records of the Borrower
in accordance with GAAP) MINUS (i) the sum of any amounts attributable to (a)
goodwill, (b) intangible items such as unamortized debt discount and expense,
patents, trade and service marks and names, copyrights and research and
development expenses except prepaid expenses, (c) all reserves not already
deducted from assets, (d) any write-up in the book value of assets resulting
from any revaluation thereof subsequent to the Balance Sheet Date (other than
any write-up in the book value of inventory if and to the extent
<PAGE> 3
permitted in accordance with GAAP) and (e) the value of any minority interests
in Subsidiaries AND (ii) Consolidated Total Liabilities, PLUS any Subordinated
Intercompany Debt.
"CONSOLIDATED TOTAL LIABILITIES" means, at any date as of which the
amount thereof shall be determined, all obligations that should, in accordance
with GAAP, be classified as liabilities on the consolidated balance sheet of the
Borrower and its Subsidiaries, including in any event all Indebtedness.
"DISBURSEMENT DATE" means the date on which the Term Loan and certain
drawings under the Working Capital Line Facility are to be disbursed.
"DM" means Deutsche Mark.
"EBIT" means for any period an amount equal to Net Income for such
period, plus the following, to the extent deducted in computing such Net Income:
(i) interest on Indebtedness for borrowed money, (ii) taxes and (iii) all
extraordinary items.
"ELIGIBLE INVENTORY" means, at any given time, the lesser of (a) the
fair market value of, or (b) the amounts shown on the books and records of the
Borrower (valued on a first-in first-out basis, in accordance with GAAP) in
respect of, all inventory owned by the Borrower which is held for sale or which
consists of raw materials or work-in-progress, and which:
(i) is subject to a valid, first priority (except for Permitted
Liens) security transfer of title in favour of the Bank under
the Security Transfer Agreement;
(ii) is in good saleable condition, is not deteriorating in quality
and is not obsolete;
(iii) is owned by the Borrower free and clear of all liens, security
interests or encumbrances whatsoever other than those in
favour of the Bank and Permitted Liens, less the aggregate
amount of accounts payable relating to the Eligible Inventory
(whereby accounts payable to Simonds Industries, Inc. for the
delivery of goods which relate to Eligible Inventory shall not
be deducted).
"ELIGIBLE RECEIVABLES" means, at any given time, the aggregate amount
of all accounts receivable (including bills of exchange) carried on the books
and records of the Borrower in accordance with GAAP arising in the ordinary
course of business of the Borrower, less all reserves with respect to such
accounts receivable and less any and all offsets, right of retention,
counterclaims or other contras in respect thereof, and which accounts receivable
(i) are originally due in accordance with the standard terms
presently extended by the Borrower payable within no more than
one hundred and twenty (120) days of the date of invoice, and
are not past due by more than thirty (30) days;
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(ii) constitute the valid, binding and legally enforceable
obligation of the obligor thereon, and are not expressly
subordinated to any other claims against such obligor;
(iii) are not evidenced by any instrument, unless for the benefit of
the Bank or the Borrower;
(iv) are owned by the Borrower free and clear of all liens,
security interests or encumbrances whatsoever, other than
those in favour of the Bank and Permitted Liens;
(v) are not the subject of a return, rejection, loss of or damage
to the goods, the sale of which gave rise to the account
receivable, or any request for credit or adjustment, or any
other dispute with the obligor of the account receivable;
(vi) are from an obligor on the account receivable which is
creditworthy in the reasonable business judgment of the Bank;
(vii) are not accounts receivable from an obligor which is subject
to or for which a petition has been filed by itself or any
third party, for relief under any existing of future law
relating to bankruptcy, composition, insolvency,
reorganization or relief of debtors, made a general assignment
for the benefit of creditors, suspended business operations,
became insolvent, called a meeting of its creditors for the
purpose of obtaining any financial concession or
accommodation, or had or suffered a receiver or a trustee to
be appointed for all or a significant portion of its assets or
affairs;
(viii) are subject to a valid, first priority security interest
(except for Permitted Liens) in favour of the Bank pursuant to
the Global Assignment Agreement; and
(ix) are otherwise satisfactory to the Bank, in its sole
discretion, using reasonable business judgment.
plus bills of exchange which have been, and for as long as they remain
to be, accepted by the Bank under the discount credit according to
Clause 3.2.5 below.
For the purpose of this definition, to the extent that the Borrower is
at any time directly or contingently indebted for any reason to any
obligor, the accounts receivable owing to the Borrower by such obligor
shall be deemed to be subject to an offset, right of retention,
counterclaim or other contra in the amount of such indebtedness.
"EVENT OF DEFAULT" means any of the events specified in Clause 12.
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"FLEET AGREEMENT" means the Amended and Restated Credit Agreement dated
as of November 1, 1991 between Fleet Bank of Massachusetts, N.A and Simonds
Industries, Inc. as amended, supplemented, restated or novated from time to
time.
"GAAP" means generally accepted accounting principals as in effect from
time to time in the United States of America, which shall include the official
interpretations thereof by the Financial Accounting Standards Board,
consistently applied.
"GLOBAL ASSIGNMENT AGREEMENT" means the global assignment agreement
between the Borrower and the Bank.
"GUARANTEES" means the guarantees dated as of January 29, 1993 by
Simonds Holding Company Inc. and Simonds Industries Inc. in favour of the Bank.
"GUARANTORS" means Simonds Holding Company Inc. and Simonds Industries
Inc.
"INDEBTEDNESS" means, with respect to any person or entity, and
includes, without duplication, all obligations of such person or entity which in
accordance with GAAP shall be classified upon a balance sheet as liabilities of
such person or entity, and in any event includes all (i) obligations of such
person or entity for borrowed money or which has been incurred in connection
with the acquisition of property or assets, (ii) obligations secured by any lien
or other charge upon property or assets owned by such person or entity, even
though such person or entity has not assumed or become liable for the payment of
such obligations, (iii) obligations created or arising under any conditional
sale or other title retention agreement with respect to property acquired by
such person or entity, notwithstanding the fact that the rights and remedies of
the seller, lender or lessor under such agreement in the event of default are
limited to repossession or sale of property, (iv) guaranties of obligations of
others for borrowed money, and (v) rentals on any capitalized lease.
"INTEREST PERIOD" means any interest period relating to the Term Loan
as specified in Clause 7.1.1.
"LAND CHARGES VOLKSBANK HESSISCH-LICHTENAU" means the following land
charges (Grundschulden) granted in favour of Volksbank Hessisch-Lichtenau eG,
Hessisch-Lichtenau:
(i) registered in Division III of the Land Register of the Lower
District Court (Amtsgericht) Melsungen vol. 95, folio 3071
(before vol. 60, folio 2042), with respect to any or all of
the real properties
- con. no. 1: Jahnstra(beta)e, district of Spangenberg,
lot 5, parcel 91/1, 1.600 square Meters (before con.
no. 25 in vol. 60, folio 2042: Am Muhlgraben);
- con. no. 2: Heinrich-Bender-Stra(beta)e 7, district
of Spangenberg, lot 22, parcel 19/1, 1.561 square
Meters (before con. no. 17 in vol. 60, folio 2042);
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<PAGE> 6
- con. no. 3: Heinrich-Bender-Stra(beta)e 7, district
of Spangenberg, lot 22, parcel 20, 396 square Meters
(before con. no. 20 of vol. 60, folio 2042: In der
Aue)
in the following amounts:
- con. no. 1 (before con. no. 5 of vol. 60, folio
2042): land charge in the amount of DM 150,000;
- con. no. 2 (before con. no. 6 of vol. 60, folio
2042): land charge in the amount of DM 50,000;
- con. no. 3 (before con. no. 16 of vol. 60, folio
2042): land charge in the amount of DM 200,000;
- con. no. 4 (before con. no. 18 of vol. 60, folio
2042): land charge in the amount of DM 200,000;
- con. no. 5 (before con. no. 19 of vol. 60, folio
2042): land charge in the amount of DM 400,000;
(ii) registered in Division III of the Land Register of the Lower
District Court (Amtsgericht) Melsungen vol. 59, folio 1978,
with respect to any or all of the real properties
- con. no. 4: Lochmuhle 3-7, district of Spangenberg,
lot 5, parcel 92/1, 2.445 square Meters;
- con. no. 5: Adam-Schenk-Stra(beta)e, district of
Spangenberg, lot 4, parcel 54/5, 16 square Meters;
and
Lochmuhle 3-7, district of Spangenberg, lot 5, parcel
92/8, 4.290 square Meters
in the following amounts:
- con. no. 1: land charge in the amount of DM 70,000;
- con. no. 2: land charge in the amount of DM 130,000;
- con. no. 3: land charge in the amount of DM 100,000;
- con. no. 4: land charge in the amount of DM 950,000;
- con. no. 5: land charge in the amount of DM 600,000;
- con. no. 6: land charge in the amount of DM 400,000;
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<PAGE> 7
- con. no. 7: land charge in the amount of DM 200,000.
"LOAN DOCUMENT" or "LOAN DOCUMENTS" means, as the case may be, any or
all of the Security Transfer Agreement, Global Assignment Agreement, Trade Mark
Assignment Agreement, Guarantees, Share Pledge Agreement, Assignment of Land
Charges Hessisch-Lichtenau, Simonds Holding Statement of Subordination, Simonds
Industries Statement of Subordination, Term Loan Notice of Drawing, Repayment
Notice of Drawing, any other notice of drawing hereunder, Borrowing Base Report,
form for the opening of accounts with the Bank, or any other contract,
agreement, or instrument in relation to this Agreement to which the Borrower
and/or the Guarantors are or will become a party.
"NET INCOME" means the consolidated gross revenues of the Borrower and
its subsidiaries for the period in question, less all expenses and other proper
charges (including taxes on income), all determined in accordance with US-GAAP.
"PERMITTED LIENS" means
(i) any judicial liens in favour of third parties (e.g. taxes,
landlords, warehouses) arising by operation of law;
(ii) any liens on goods supplied to the Borrower arising from a
retention of title (Eigentumsvorbehalt) imposed by the
suppliers of the Borrower in connection with the supply of
goods in the ordinary course of business of the Borrower;
(iii) any security transfers, assignments for security purposes,
land charges, pledges, or other encumbrances created by the
Borrower in favour of third parties in connection with
indebtedness for borrowed money as permitted pursuant to
Clause 9.1 below or on any of the fixed assets or inventory or
accounts receivable of the Borrower released pursuant to the
respective provisions of the Security Transfer Agreement, the
Global Assignment Agreement and the Trade Mark Assignment
Agreement.
"REAL ESTATE" means the real estate owned by the Borrower and
registered in:
(i) the Land Register of the Lower District Court (Amtsgericht)
Melsungen vol. 95, folio 3071 (before vol. 60, folio 2042),
- con. no. 1: Jahnstra(beta)e, district of Spangenberg,
lot 5, parcel 91/1, 1.600 square Meters (before con.
no. 25 in vol. 60, folio 2042: Am Muhlgraben);
- con. no. 2: Heinrich-Bender-Stra(beta)e 7, district
of Spangenberg, lot 22, parcel 19/1, 1.561 square
Meters (before con. no. 17 in vol. 60, folio 2042);
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<PAGE> 8
- con. no. 3: Heinrich-Bender-Stra(beta)e 7, district
of Spangenberg, lot 22, parcel 20, 396 square Meters
(before con. no. 20 of vol. 60, folio 2042: In der
Aue)
(ii) the Land Register of the Lower District Court (Amtsgericht)
Melsungen vol. 59, folio 1978,
- con. 4: Lochmuhle 3-7, district of Spangenberg, lot
5, parcel 92/1, 2.445 square Meters ;
- con. no. 5: Adam-Schenk-Stra(beta)e, district of
Spangenberg, lot 4, parcel 54/5, 16 square Meters;
- Lochmuhle 3-7, district of Spangenberg, lot 5, parcel
92/8, 4.290 square Meters; and
- con. no. 6: Lochmuhle 3-7, district of Spangenberg,
lot 5, parcel 92/10.
"SECURITY TRANSFER AGREEMENT" means the security transfer agreement
between the Borrower and the Bank.
"SHARE PLEDGE AGREEMENT" means the share pledge agreement between
Simonds Industries Inc. and Simonds Holding Company Inc. as pledgors and the
Bank as pledgee concerning a pledge over all shares in the Borrower.
"SIMONDS HOLDING STATEMENT OF SUBORDINATION" means the statement of
subordination by Simonds Holding Company Inc. in favor of the Bank.
"SIMONDS INDUSTRIES STATEMENT OF SUBORDINATION" means the statement of
subordination by Simonds Industries Inc. in favour of the Bank.
"SUBORDINATED INTERCOMPANY DEBT" means indebtedness owed to Simonds
Industries Inc. or directly or indirectly wholly owned subsidiaries of Simonds
Industries Inc. the payment of principal of and interest on which is expressly
subordinated in right of payment, in form and on terms approved by the Bank in
writing, to the prior payment in full of any outstandings owed by the Borrower
to the Bank, and includes in particular, but without limitation, the
Indebtedness subordinated by the Simonds Holding Statement of Subordination and
the Simonds Industries Statement of Subordination.
"SUBSIDIARY" means any corporation, association, joint stock company,
business trust or other similar organization of which 50% or more of the
ordinary voting power for the election of a majority of the members of the board
of directors or other governing body of such entity is held or controlled by the
Borrower or a Subsidiary of the Borrower; or any other such organization the
management of which is directly or indirectly controlled by the Borrower or a
Subsidiary of the Borrower through the exercise of voting power or otherwise; or
any joint venture, whether incorporated or not, in which the Borrower has a 50%
ownership interest.
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<PAGE> 9
"TERM LOAN" means the term loan in the nominal amount of DM 4,200,000.
"TERM LOAN NOTICE OF DRAWING" means the notice of drawing of the
Borrower with respect to the Term Loan.
"TOTAL LIABILITIES" means all liabilities of the Borrower as determined
in accordance with GAAP.
"TRADE MARK ASSIGNMENT AGREEMENT" means the trade mark assignment
agreement between the Borrower and the Bank.
"WORKING CAPITAL LINE FACILITY" means the working capital line facility
granted by the Bank to the Borrower in the aggregate nominal amount of DM
5,500,000.
2. THE TERM LOAN
2.1 TERM LOAN: The Bank shall make the Term Loan available to the
Borrower in one amount.
2.2 PURPOSE: The Borrower shall apply the proceeds of the
disbursement of the Term Loan exclusively to
2.2.1 firstly, to the extent necessary after having made
full use of an amount of DM 3,380,000 which will be drawn by the
Borrower under the Working Capital Line Facility on the basis of the
Borrowing Base as of the Disbursement Date for the repayments
(including the guarantees required from the Bank for outstanding bills
of exchange) to Volksbank Spangenberg Zweigniederlassung der Volksbank
Hess.-Lichtenau eG and Kreissparkasse Kassel pursuant to Clause 3.2
below, to the repayment of any residual amounts still outstanding with
the same; and
2.2.2 secondly, to the extent of the unused portion of the
Term Loan after payments pursuant to Clause 2.2.1 above, to the payment
of all accrued interest and the partial repayment of principal of the
intercompany loan extended to the Borrower by Simonds Holding Company
Inc. pursuant to the Intercompany Loan Agreement dated January 21, 1992
in the principal amount of U.S. $2,533,376.00.
2.3 The Bank is hereby unconditionally and irrevocably
instructed by the Borrower to disburse the usable amount of the Term
Loan by purchasing, with the DM amount drawn, U.S. Dollars in Frankfurt
am Main at the spot rate prevailing at the time of drawing, and by
remitting the U.S. Dollar amount to Simonds Holding Company Inc. in
partial discharge of the claim of Simonds Holding Company Inc. against
the Borrower for payment of accrued interest and repayment of capital
on the intercompany loan specified in Clause 2.2.2 above, all in
accordance with the Term Loan Notice of Drawing.
3. THE WORKING CAPITAL LINE FACILITY
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<PAGE> 10
3.1 FACILITY: The Bank shall grant the Borrower the Working
Capital Line Facility.
3.2 PURPOSE: The Borrower shall apply the proceeds of drawings
under the Working Capital Line Facility as follows:
3.2.1 The Borrower shall repay (or use) an amount equalling
the amount notified by Volksbank Spangenberg Zweigniederlassung der
Volksbank Hess.-Lichtenau eG, Spangenberg, to the Bank as of the
Disbursement Date (or any other date specified by the aforementioned
bank) to be the aggregate amount of repayable outstanding sums (or sums
required by such bank to be guaranteed by the Bank with respect to
outstanding bills of exchange) of principal, interest, fees and other
amounts under the credit agreement (Kreditvertrag) no. 20 0686 made
between Volksbank Spangenberg Zweigniederlassung der Volksbank
Hess.-Lichtenau eG as lender and the Borrower as borrower and dated
September 27, 1990.
3.2.2 The Borrower shall repay (or use) an amount equalling
the amount notified by Kreissparkasse Kassel, Kassel, to the Bank as of
the Disbursement Date (or any other date specified by the
aforementioned bank) to be the aggregate amount of repayable
outstanding sums (or sums required by such bank to be guaranteed by the
Bank with respect to outstanding bills of exchange) of principal,
interest, fees and other amounts under the credit agreement
(Universalvertrag fur Geschaftskredite) customer no. 86058 made between
Kreissparkasse Kassel as lender and the Borrower as borrower and dated
January 23, 1992.
3.2.3 With respect to the amounts specified pursuant to
Clauses 3.2.1 and 3.2.2 above, the Bank is hereby unconditionally and
irrevocably instructed by the Borrower to disburse the aforesaid
amounts under the Working Capital Line Facility (or any amounts drawn
with respect to the repayments specified pursuant to Clauses 3.2.1 and
3.2.2 above under the Term Loan pursuant to Clause 2.2.1 above)
directly to Volksbank Spangenberg Zweigniederlassung der Volksbank
Hess-Lichtenau and Kreissparkasse Kassel, respectively.
3.2.4 Except for the amounts specified in Clauses 3.2.1 and
3.2.2 above, the Borrower shall apply the proceeds of any drawings
under the Working Capital Line Facility exclusively to the financing of
its day to day business operations.
3.2.5 From the Working Capital Line Facility, an amount of
up to DM 1,000,000 may be drawn by the Borrower as discount credit
against presentation by the Borrower to the Bank of bills of exchange
(Wechsel) under the following terms and conditions:
3.2.5.1 The Bank may decide on the acceptance of
bills of exchange on a case by case basis. The Bank will in
any event only accept bills of exchange which have a maximum
maturity of no more than ninety (90) days and which are
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<PAGE> 11
(except where otherwise agreed by the Bank on a case by case
basis) acceptable for rediscount by the Deutsche Bundesbank.
3.2.5.2 If no special agreement is made, bills of
exchange shall be deemed accepted by the Bank for collection
purposes only, but not for discounting by the Bank.
3.2.5.3 If no special agreement is made, the Bank
shall be authorized to present bills of exchange for payment
at maturity or to rediscount bills of exchange with the
Deutsche Bundesbank.
3.2.5.4 The Bank shall be authorized to return bills
of exchange to the Borrower and to debit the account of the
Borrower accordingly (including any loss of interest or other
damage suffered by the Bank) if:
(i) the Bank will become aware of any
circumstances which, in the reasonable discretion of
the Bank, give rise to believe that any of the
obligors under the bill of exchange is not or no
longer in a position to honour the bill of exchange
at maturity; or
(ii) the bill of exchange will be
protested by any of the obligors thereunder; or
(iii) any bill of exchange rediscounted
by the Bank with the Deutsche Bundesbank will be
returned by the Deutsche Bundesbank to the Bank
thereafter on the basis that the bill of exchange is
found by the Deutsche Bundesbank not to be suitable
for rediscount; or
(iv) the bill of exchange will not be
honoured in the full amount against presentation at
maturity; or
(v) the proceeds from presentation of
the bill of exchange cannot be collected at maturity
by the Bank in full due to any legislative or
governmental act; or
(vi) the Bank will not or not timely be
in a position, for reasons for which the Bank is not
responsible, to present the bill of exchange for
payment at maturity.
3.2.5.5 At the time of accepting delivery of a bill
of exchange for collection, the Bank shall acquire title to
the bill of exchange for security purposes. At the time of
accepting delivery of a bill of exchange for discount, the
Bank shall acquire unrestricted legal title to the bill of
exchange. If the Bank will be entitled to return any
discounted bill of exchange to the Borrower and to debit
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<PAGE> 12
the account of the Borrower accordingly, the Bank shall retain
title to the bill of exchange for security purposes.
3.2.5.6 When acquiring title to a bill of exchange,
the Bank shall also acquire title to the claims underlying the
bill of exchange (assignment for security purposes).
3.2.5.7 The transfer of title to the bills of
exchange and the assignment of security purposes of the
underlying claims shall serve the purpose of securing all
claims the Bank may have against the Borrower as a result of
any event entitling the Bank to return the bill of exchange to
the Borrower.
4. DISBURSEMENTS
4.1 DISBURSEMENT OF TERM LOAN: Subject to the exception granted in
Clause 4.3 below with respect to the repayment to be made to Volksbank
Spangenberg Zweigniederlassung der Volksbank Hess.-Lichtenau eG, the Borrower
shall on the Disbursement Date draw the Term Loan in one amount. The Bank shall
only be obliged to disburse the Term Loan if all of the following conditions
have been met in full:
4.1.1 REPRESENTATION, WARRANTIES, AGREEMENTS: As of the
Disbursement Date, the representations, warranties and agreements of
the Borrower in this Agreement and in any of the other Loan Documents
to which the Borrower is or is to become a party, and of the Guarantors
in the Guarantees are true and accurate in all respects and have been
duly complied with.
4.1.2 TERM LOAN NOTICE OF DRAWING: The Bank shall have
received not later than 10 a.m. (Frankfurt time) on the second Banking
Day prior to the Disbursement Date the Term Loan Notice of Drawing
certifying that, as of the Disbursement Date, the representations,
warranties and agreements of the Borrower in this Agreement and in any
of the other Loan Documents to which the Borrower is or is to become a
party and of the Guarantors in the Guarantee are true and accurate in
all respects and have been duly complied with, and that no Event of
Default has occurred.
4.1.3 AGREEMENTS EXECUTED: On or prior to the Disbursement
Date, all agreements and documents listed in SCHEDULE 1 hereto have
been, in form and contents satisfactory to the Bank, duly executed,
delivered and exchanged by all parties thereto, and where indicated
delivered to the Bank in the original or where appropriate in copy.
4.1.4 CLOSING FEE: On or prior to the Disbursement Date,
the Bank shall have the right to withhold the Closing Fee free of any
counterclaim or right of set-off.
4.2 DRAWINGS UNDER THE WORKING CAPITAL LINE FACILITY: On the
Disbursement Date or any other date specified by Volksbank Spangenberg
Zweigniederlassung der Volksbank Hessisch-Lichtenau eG or Kreissparkasse Kassel
the Borrower shall draw the amounts specified
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<PAGE> 13
pursuant to Clauses 3.2.1 and 3.2.2 above and shall be entitled on or after the
Disbursement Date to draw other amounts under the Working Capital Line Facility.
To the extent requested by the Borrower the Bank shall provide guarantees to
Volksbank Spangenberg Zweigniederlassung der Volksbank Hessisch-Lichtenau e.G.
and Kreissparkasse Kassel for liabilities of the Borrower to these credit
institutions resulting from bills of exchange up to a maximum amount of DM
180,000 in the case of Volksbank Spangenberg Zweigniederlassung der Volksbank
Hessisch-Lichtenau e.G. and DM 100,000 in the case of Kreissparkasse Kassel. For
the time and to the extent that liabilities of the Borrower to Volksbank
Spangenberg Zweigniederlassung der Volksbank Hessisch-Lichtenau e.G. and
Kreissparkasse Kassel resulting from bills of exchange are existing, the
granting of guarantees by the Bank concerning such liabilities is deemed to be a
drawing under the Working Capital Line Facility. The Bank shall only be obliged
to disburse any amounts and to make any guarantees under the Working Capital
Line Facility if:
4.2.1 CONDITIONS FOR TERM LOAN: all of the conditions
specified in Clause 4.1 above have been met in full; and
4.2.2 REPAYMENT NOTICE OF DRAWING: the Bank shall have
received not later than 10 a.m. (Frankfurt time) on the second Banking
Day prior to the Disbursement Date the Repayment Notice of Drawing; and
4.2.3 DISBURSEMENT OF TERM LOAN: the Term Loan has been
disbursed upon the fulfilment of all conditions precedent thereto.
4.3 WAIVER: The Bank may in its free discretion and upon terms as
it deems appropriate, waive the compliance with the whole or any of the
conditions precedent for disbursement set forth in Clauses 4.1 and 4.2 above.
Until the Bank will be in receipt of satisfactory evidence of the execution of
the Assignment of Land Charges Hessisch-Lichtenau and the statement of Volksbank
Spangenberg Zweigniederlassung der Volksbank Hess.-Lichtenau eG pursuant to
Clause 3.2.1 in form and contents satisfactory to the Bank, the Bank shall have
the right to withhold from the Term Loan and/or the Working Capital Line
Facility such amounts as will in the discretion of the Bank be necessary to make
the payments (or give the guarantees with respect to outstanding bills of
exchange) required to be made to induce Volksbank Spangenberg Zweigniederlassung
der Volksbank Hess.-Lichtenau eG to execute the Assignment of Land Charges
Hessisch-Lichtenau (albeit in escrow) and the statement pursuant to Clause 3.2.1
in form and substance satisfactory to the Bank.
5. REPAYMENT OF TERM LOAN
5.1 REPAYMENTS: Subject as otherwise provided in this Agreement,
the Term Loan shall be repaid in 28 equal quarterly installments in the amount
of DM 150,000 each, the first of which shall be payable on March 31, 1993 and
the last of which shall be payable on December 31, 1999.
5.2 PREPAYMENTS: The Borrower shall be entitled to prepay at the
end of an Interest Period principal amounts of the Term Loan in the minimum
amount of DM 100,000 or integral
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<PAGE> 14
multiples thereof. Any notice of prepayment shall be irrevocable and shall be
given at least one month prior to the date of prepayment. Any prepayment will be
applied to any outstanding ordinary installments of repayment in inverse order
of maturity.
5.3 NO REBORROWINGS: Any amounts repaid pursuant to Clauses 5.1 or
5.2 above may not be reborrowed.
6. AVAILABILITY, REPAYMENT AND CANCELLATION OF WORKING CAPITAL LINE
FACILITY
6.1 CURRENT CHECKING ACCOUNT: The Borrower shall open a current
checking account (Kontokorrentkonto) at the office of the Bank in Frankfurt am
Main by completing standard documentation required in accordance with usual
practice of the Bank.
6.2 DRAWINGS: Subject always to Clause 6.4 below, the Borrower
shall be entitled to borrow, repay and reborrow any amounts made available under
the Working Capital Line Facility, provided, however, that the aggregate amounts
of outstandings (principal, interest and fees and charges) with respect to
discount credit pursuant to Clause 3.2.5 above may at no time exceed DM
1,000,000, and further provided that the aggregate amount of outstandings
(principal, interest and fees and charges) may in total at no time exceed DM
5,500,000.
6.3 CANCELLATION OF WORKING CAPITAL LINE FACILITY: The Working
Capital Line Facility is made available to the Borrower on an on demand basis
and may be cancelled by the Bank at any time in whole or in part. Upon receipt
of a written notice from the Bank to the effect that the Working Capital Line
Facility shall be cancelled in its entirety or reduced to a certain maximum
amount, the Borrower shall repay to the Bank within five (5) Banking Days from
receipt of such notice any amounts outstanding under the Working Capital Line
Facility, including accrued interest and fees and charges, which are in excess
of the newly determined maximum amount (which may be a nil amount) of the
Working Capital Line Facility. The Working Capital Line Facility will
automatically terminate on December 31, 1999 (or any other earlier date on which
the Term Loan will be repaid) on which date all outstanding amounts under the
Working Capital Line Facility including accrued interest and fees and charges
shall become due and payable to the Bank.
6.4 BORROWING BASE: The aggregate amount of outstandings
(principal, interest, fees and charges) under the Working Capital Line Facility
may at no time exceed the Borrowing Base. If at any time the aggregate
outstanding amount will exceed the Borrowing Base for any reason whatsoever, the
Borrower shall immediately notify the Bank thereof and shall within five (5)
days pay the amount of such excess to the Bank.
7. INTEREST
7.1 TERM LOAN: The Term Loan shall bear interest as follows:
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7.1.1 INTEREST PERIODS: Interest shall be calculated and
payable by reference to successive Interest Periods. Each Interest
Period shall be of 1, 2, 3 or 6 months' duration as selected by the
Borrower in the Term Loan Notice of Drawing or thereafter in a notice
received by the Bank not later than 10 a.m. (Frankfurt time) on the
second Banking Day prior to the first day of the Interest Period,
provided that
7.1.1.1 if the Borrower fails to select the duration
of the next applicable Interest Period in accordance with the
provisions of this Clause 7.1.1, such Interest Period shall be
for a period of three (3) months;
7.1.1.2 each subsequent Interest Period shall
commence on the day immediately following the expiry of the
preceding Interest Period;
7.1.1.3 if an Interest Period would otherwise end on
a day which is not a Banking Day, such Interest Period shall
end on the next Banking Day in the same calendar month or, if
none, on the immediately preceding Banking Day.
7.1.2 INTEREST RATE: The Interest rate shall be calculated
as follows:
7.1.2.1 Unless otherwise provided in this Agreement
the rate of interest for the Term Loan applicable to each
Interest Period shall be the rate of 1.5 % p.a. (one and one
half of one percent per annum) above the Frankfurt InterBank
Offered Rate ("FIBOR") relating to such Interest Period. FIBOR
shall mean the rate p.a. at which prime banks are being
offered deposits in Deutsche Mark for like periods in the
Frankfurt InterBank Market as quoted on Telerate Screen Page
No. 2200 at or about 11 a.m. Frankfurt time on the third
Banking Day prior to the first day of such Interest Period.
7.1.2.2 If, for any reason, the quotation pursuant
to Clause 7.1.2.1 shall not be available, then interest
relating to such Interest Period shall be determined by the
Bank which determination shall be conclusive and binding on
the Borrower as being the arithmetic mean rounded upwards to
the nearest 1/16 of one percent of the rates p.a. at which the
Bank is being offered similar amounts for similar periods in
Deutsche Mark by prime banks in the Frankfurt InterBank Market
at or about 11 a.m. Frankfurt time on the second Banking Day
prior to the first day of such Interest Period.
7.1.2.3 INTEREST PAYMENTS: Interest for each
Interest Period shall be payable in arrears on the last day of
the respective Interest Period.
7.2 WORKING CAPITAL LINE FACILITY: Any drawings under the Working
Capital Line Facility shall bear interest as follows:
7.2.1 DISCOUNT CREDIT: Any amounts drawn under the Working
Capital Line Facility with respect to discount credit pursuant to
Clause 3.2.5 shall bear interest at the
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rate per annum equal to the Discount Rate (Diskontsatz), as fixed by
the Deutsche Bundesbank from time to time, plus 1.25%.
7.2.2 OTHER DRAWINGS: Any other amounts drawn under the
Working Capital Line Facility pursuant to Clauses 3.2.1, 3.2.2 and
3.2.4 above shall bear interest
7.2.2.1 up to an amount of drawings of no more than
DM 4,000,000 at the rate per annum equal to the annual rate of
interest announced from time to time by the Bank as its "best
offered overdraft rate" for loans in Deutsche Mark plus 0.25%;
and
7.2.2.2 if and for so long as the aggregate amount
of drawings exceeds DM 4,000,000, with respect to the excess
amount at the rate per annum equal to the annual rate of
interest announced from time to time by the Bank as its "best
offered overdraft rate" for loans in Deutsche Mark plus 0.50%.
7.2.3 DRAWINGS FOR GUARANTEES: For any drawings under the
Working Capital Line Facility for amounts which shall be guaranteed by
the Bank to Volksbank Spangenberg Zweigniederlassung der Volksbank
Hessisch-Lichtenau eG or Kreissparkasse Kassel for outstanding bills of
exchange pursuant to Clauses 3.2.1 or 3.2.2 above, the Bank shall
receive, in lieu of interest thereon, a guarantee fee at the rate of
0.25% per annum. Any provisions of this Agreement applicable to
interest on drawings under the Working Capital Line Facility shall
apply mutatis mutandis to such fee.
7.2.4 INTEREST PAYMENTS: Interest shall be payable monthly
in arrears at the end of each calendar month.
7.3 INTEREST CALCULATION: All calculations of interest on the Term
Loan or drawings under the Working Capital Line Facility shall be based on a
360-day year and on the actual amount of days elapsed on which the respective
amounts of principal were outstanding.
8. CERTAIN COMMON PROVISIONS
8.1 MANDATORY PREPAYMENT FOLLOWING CHANGE OF OWNERSHIP: In the
event that the Borrower ceases to be a directly or indirectly wholly owned
subsidiary of Simonds Industries Inc. or any corporation, partnership or other
entity which is wholly owned by Simonds Industries Inc., the Borrower shall
repay, immediately upon the occurrence of such event, all principal and accrued
interest and any other sums outstanding under the Term Loan and pursuant to all
drawings made under the Working Capital Line Facility.
8.2 PAYMENTS DUE ON NON-BUSINESS DAY: Except as otherwise
specifically provided herein, whenever a payment to be made hereunder becomes
due on a day which is not a Banking Day, the due date for such payment shall be
extended to the next succeeding day which is a Banking Day, and interest shall
accrue during such extension.
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8.3 CHANGE IN MARKET CONDITIONS: In the event that the Bank shall
determine that adequate and reasonable methods do not exist for ascertaining the
FIBOR applicable to the Term Loan, the Bank shall forthwith give written notice
of such determination (which shall be conclusive and binding on the Borrower) at
least one (1) Banking Day prior to the first day of the Interest Period
concerned. In such event, the Bank shall negotiate with the Borrower with a view
to agreeing on an alternative basis for calculating the interest payable on
and/or for making, maintaining and/or funding of the Term Loan. Any alternative
basis agreed in writing by the Bank and the Borrower within two (2) weeks of the
Bank's notification shall take effect in accordance with its terms. If an
alternative basis is not so agreed, the Borrower shall immediately prepay the
Term Loan together with accrued interest at the rate per annum equal to the rate
specified by the Bank to be an interest rate equivalent to the cost to the Bank
of funding plus 1.5%.
8.4 ILLEGALITY: If any introduction of or change in any law,
regulation, treaty or directive or in the interpretation or application thereof
shall make it unlawful, or any central bank or other fiscal, monetary or other
governmental authority having jurisdiction over the Bank shall assert that it is
unlawful, for the Bank to make or maintain the Term Loan and/or the Working
Capital Line Facility, the Bank shall forthwith give written notice to the
Borrower. In such event, any amounts outstanding under the Term Loan or drawn
under the working Capital Line Facility shall be prepaid by the Borrower
together with accrued interest and any other amounts outstanding at the last day
of the current Interest Period applicable to the Term Loan or at such earlier
date as may be required by law.
8.5 INCREASED COSTS: If any introduction of or change in any law,
regulation, treaty or directive or in the interpretation or application thereof,
or any request, directive, instruction or notice hereafter made upon or
otherwise issued to the Bank by any central bank or other fiscal, monetary or
other governmental authority, shall:
8.5.1 hereafter subject the Bank to any tax, levy, impost,
duty, charge, fee, deduction or withholding of any nature with respect
to this Agreement (other than taxes on income or profit of the Bank);
or
8.5.2 materially change the basis of taxation (except for
changes in taxes on income or profit of the Bank) of payments to the
Bank of the principal of or interest on any amounts outstanding under
this Agreement; or
8.5.3 impose or increase or render applicable any deposit,
reserve, assessment, liquidity, or other similar requirements against
assets held by, or deposits in or for the account of, or loans by, or
commitments of, or bankers acceptances created by, the Bank; or
8.5.4 impose on the Bank any other conditions or
requirements with respect to this Agreement, and
8.5.5 the result of the foregoing is
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<PAGE> 18
(i) to increase the cost to the Bank of making,
funding, issuing, renewing, extending or maintaining the Term
Loan or any drawings under the Working Capital Line Facility;
or
(ii) to reduce the amount of principal, interest
or other amounts payable to the Bank under this Agreement; or
(iii) to require the Bank to make any payment or
to forego any interest or other sum payable under this
Agreement, the amount of which payment or foregone interest or
other sum is calculated by reference to the gross amount of
any sum receivable or deemed received by the Bank from the
Borrower under this Agreement,
8.5.6 then, and in each such case, the Borrower shall, upon
demand by the Bank, at any time and from time to time and as often as
the occasion therefor may arise, pay to the Bank such additional
amounts as will be sufficient to compensate the Bank for such
additional cost, reduction, payment or foregone interest or other sum,
as determined by the Bank which determination by the Bank shall be
conclusive and binding on the Borrower, safe for manifest error.
8.6 CAPITAL ADEQUACY: If the Bank shall have determined that any
present or future applicable law, regulation, guideline, directive or request
(whether or not having force of law) regarding capital requirements for banks or
bank holding companies, or any change therein or in the interpretation or
administration thereof by any governmental authority, central bank or comparable
agency charged with the interpretation or administration thereof, or compliance
by the Bank with any of the foregoing, imposes or increases a requirement by the
Bank to allocate capital resources to the Bank's commitment to make, or to the
Bank's maintenance of, loans hereunder, which has or would have the effect of
reducing the return on the Bank's capital to a level below that which the Bank
could have achieved (taking into consideration the Bank's then existing policies
with respect to capital adequacy and assuming full utilization of the Bank's
capital) but for such applicability, change, interpretation or compliance, by
any amount deemed by the Bank to be material, the Bank shall promptly after its
determination of such occurrence give written notice thereof to the Borrower.
The Borrower and the Bank shall thereafter attempt to negotiate in good faith an
adjustment to the compensation payable hereunder which will adequately
compensate the Bank for such reduction. If the Borrower and the Bank are unable
to agree to such adjustment within two (2) weeks of the day on which the
Borrower receives such notice, then commencing on the date of such notice (but
not earlier than the effective date of any such applicability, change,
interpretation or compliance), the amounts payable hereunder shall increase by
an amount which will, in the Bank's reasonable determination, compensate the
Bank for such reduction, the Bank's determination of such amount to be
conclusive and binding on the Borrower, absent manifest error. In determining
such amount, the Bank may use any reasonable methods of averaging, allocating or
attributing such reduction among its customers.
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<PAGE> 19
8.7 INTEREST ON OVERDUE AMOUNTS: Interest on overdue amounts shall
be calculated as follows:
8.7.1 INTEREST ON OVERDUE PRINCIPAL: If the Borrower shall
fail to pay any amount of principal or any other sums (except for
interest) payable by it under this Agreement on the due date thereof,
the Borrower shall pay interest on the overdue amount, for the period
from the due date until the date of receipt of payment of the overdue
amount, at the rate per annum equalling the interest rate applicable to
the overdue amount under this Agreement plus 3%.
8.7.2 INTEREST ON OVERDUE INTEREST: If the Borrower shall
fail to pay any amount of interest on the due date thereof, the
Borrower shall pay contractual damages with respect to such overdue
amount to be calculated in accordance with Clause 8.7.1 above.
8.7.3 FURTHER DAMAGES: The right of the Bank to demand
compensation for further damages suffered by reason of the delay in
payment shall remain unprejudiced.
8.7.4 ASSIGNMENT OF SUBORDINATED LOANS: The Borrower
already here and now assigns for security purposes to the Bank and the
Bank accepts such assignment of, any and all claims the Borrower may
have
(i) against Simonds Holding Company Inc. or any
successor or assign with respect to the intercompany loan
governed by the Simonds Holding Statement of Subordination; or
(ii) against Simonds Industries Inc. or any
successor or assign with respect to the Simonds Industries
Statement of Subordination for repayment of any amounts paid
by the Borrower to Simonds Holding Company Inc. and/or Simonds
Industries Inc., as the case may be, in violation of the
subordination provided in the Simonds Holding Statement of
Subordination or the Simonds Industries Statement of
Subordination.
8.8 CERTIFICATES CONCLUSIVE: Any certificate, calculation,
determination, notification, opinion or selection of the Bank provided for or
referred to in this Agreement, shall be conclusive and binding on the Borrower,
save for manifest error.
8.9 INDEMNITY: The Borrower agrees to indemnify the Bank and to
hold the Bank harmless from any loss or expense that the Bank may sustain or
incur as a consequence of a delay in payment by the Borrower in payment of
principal or interest on the Term Loan or drawings under the Working Capital
Line Facility, including any such loss or expense arising from interest or fees
payable by the Bank to lenders of funds obtained by it in order to maintain its
refinancing.
8.10 GENERAL INDEMNIFICATION: Save for cases of willful misconduct
or gross negligence on the part of the Bank, the Borrower agrees to indemnify
and hold harmless the Bank from and against any and all claims, actions and
suits, whether groundless or otherwise,
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<PAGE> 20
and from and against any and all liabilities, losses, damages and expenses of
every nature and character arising out of this Agreement or any of the other
Loan Documents to which the Borrower is or is to become a party or the
transactions evidenced thereby.
9. COVENANTS
The Borrower undertakes towards the Bank that, for so long as any sum
remains to be payable by the Borrower under or in connection with this
Agreement:
9.1 FINANCIAL COVENANTS: The Borrower will ensure that it meets
and will meet at all times the following financial covenants:
9.1.1 MINIMUM NET INCOME: The Net Income of the Borrower
during two consecutive calendar quarters shall not fall below zero. The
Borrower shall submit on an ongoing basis to the Bank within forty-five
(45) days after the end of the last preceding calendar quarter
(beginning with the calendar quarter ending on March 31, 1993), for the
last preceding two calendar quarters, such financial data and
information, prepared in accordance with GAAP consistently applied,
from which the Bank is able to verify whether the covenant pursuant to
sentence 1 above has been met.
9.1.2 INTEREST COVERAGE: The Borrower will not permit the
ratio of (a) EBIT to (b) the total expense of the Borrower for interest
on Indebtedness for borrowed money (whether or not, with respect to
subordinated debt, payment thereof is prohibited and not paid by reason
of any applicable subordination) to be less than 1.25:1. The Borrower
shall submit on an ongoing basis to the Bank, within forty-five (45)
days after the end of the last preceding calendar quarter, for the last
preceding four calendar quarters (beginning with the calendar quarter
ending on March 31, 1993 and cumulatively built-up until four calendar
quarters shall have been completed) such financial data and information
prepared in accordance with GAAP consistently applied, from which the
Bank is able to verify whether the covenant pursuant to sentence 1
above has been met.
9.1.3 TOTAL LIABILITIES TO NET WORTH: The Borrower will not
permit the ratio of (a) Total Consolidated Liabilities (excluding any
Subordinated Intercompany Debt) to (b) Consolidated Tangible Net Worth
(excluding any adjustments for exchange rate fluctuations and plus any
Subordinated Intercompany Debt) to be more than as set forth below
during the periods set forth below:
For The Periods: Maximum Ratio
---------------- -------------
1/1/93 - 12/31/93 5.5:1
1/1/94 - 12/31/94 5.5:1
1/1/95 - 12/31/95 5.0:1
1/1/96 - 12/31/96 4.0:1
1/1/97 - 12/31/97 and thereafter 3.0:1
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The Borrower shall submit on an ongoing basis to the Bank, within
forty-five (45) days after the end of the last preceding calendar
quarter, for such last preceding calendar quarter (beginning with the
calendar quarter ending on March 31, 1993) such financial data and
information, prepared in accordance with GAAP consistently applied,
from which the Bank is able to verify whether the covenant pursuant to
sentence 1 above has been met.
9.2 FINANCIAL STATEMENTS: The Borrower will deliver to the Bank
two (2) copies of the following:
9.2.1 as soon as available and in any event at least thirty
(30) days prior to the beginning of the next fiscal year its annual
budget including business projections for the next fiscal year;
9.2.2 as soon as available and in any event within ninety
(90) days after the end of each fiscal year its audited annual
financial statements prepared in accordance with German law and
generally accepted accounting principles consistently applied, as well
as a translation thereof into annual financial statements following
U.S. formate and in accordance with GAAP consistently applied;
9.2.3 as soon as available and in any event within
forty-five (45) days after the end of each calendar quarter (or quarter
of a fiscal year deviating from the calendar year) quarterly financial
statements prepared in accordance with GAAP consistently applied;
9.2.4 as soon as available and in any event within two (2)
weeks after the end of each calendar month, a Borrowing Base Report;
9.2.5 from time to time upon request by the Bank, such
other financial data and information (including, without limitation
accountants' management letters and such other information regarding
the business and affairs and conditions, financial or otherwise, of the
Borrower) as the Bank may reasonably request.
9.3 INSPECTION OF PROPERTIES AND BOOKS: The Borrower shall permit
the Bank to visit and inspect the properties of the Borrower, to examine the
books and ledgers of the Borrower (and make copies thereof and extracts
therefrom), and to discuss the affairs, finances and accounts of the Borrower
with, and to be advised as to the same by, its officers, employees and
independent public accountants (such accountants being hereby authorized by the
Borrower to so discuss and advise), all at such times and intervals as the Bank
may reasonably request, but at least twice in each calendar year. In connection
with any such inspections or discussions, the Bank, on behalf of itself or any
representative authorized by it, agrees to treat as confidential any non-public
information that the Borrower shall designate as confidential information,
provided, however, that this Clause 9.3 shall not affect the disclosure by the
Bank of information required to be disclosed to its auditors, regulatory
agencies or pursuant to any legal process or by virtue of any other law,
regulation, order or interpretation.
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9.4 INSURANCE: The Borrower shall take out and maintain with
financially sound and reputable insurers insurance with respect to its business
and in particular its assets (in particular the Real Estate) against such
casualties and contingencies as shall be in accordance with sound business
practices and in amounts, containing such terms, and for such periods as may be
reasonably satisfactory to the Bank. The Borrower hereby assigns for security
purposes to the Bank all present and future claims of the Borrower against
insurers. The Borrower shall inform the insurers of (i) the Bank's entitlement
to any and all rights under the insurance contracts, and (ii) the Bank's
exclusive assumption of the rights, and not of the obligations, under the
insurance contracts. The Borrower shall request the insurers to provide the Bank
with according security notes. In the event that the Borrower shall not insure,
or not sufficiently insure, the risks concerned, the Bank shall be entitled to
do so at the Borrower's risk and expense. If so requested by the Bank, the
Borrower shall take out the insurance in favour of the party concerned, or
naming the bank as insured party.
9.5 TAXES AND OTHER COSTS: The Borrower shall (i) duly file all
returns and other forms when the same are due for filing with respect to, and
will (ii) duly pay and discharge before the same shall become overdue, all
taxes, duties, assessments and other governmental charges imposed upon it and
its properties, in particular real properties, sales and activities, or any part
thereof, or upon the income or profits therefrom, as well as all claims for
labour, materials and supplies that, if unpaid might by law result in a lien or
other encumbrance upon any of its properties.
9.6 COMPLIANCE WITH LAWS AND CONTRACTS: The Borrower shall at all
times fully comply with (i) all applicable laws and regulations wherever its
business is conducted, including all environmental laws, (ii) all contracts, all
agreements and instruments by which it or any of its properties may be bound,
and (iii) all applicable decrees, orders or judgments, in each case where
non-compliance could reasonably be expected to have an adverse effect on the
Borrower or its business.
9.7 FURTHER ASSURANCES: The Borrower shall fully cooperate with
the Bank and execute such further instruments and documents as the Bank shall
reasonably request to carry out to its satisfaction and to implement, the
transactions contemplated in this Agreement any other Loan Documents.
9.8 NOTICE OF DEFAULT: The Borrower shall promptly notify the Bank
in writing of the occurrence of any Event of Default. If any person shall give
any notice or take any other action in respect of a claimed default under this
Agreement, or any other note, evidence of indebtedness, indenture or other
obligation to which the Borrower is a party or obligor, whether as principal or
surety, the Borrower shall forthwith give written notice of the action and the
nature of the claimed default in reasonable detail.
9.9 NOTICE OF LITIGATION AND CLAIMS: The Borrower shall,
immediately upon become aware thereof, notify the Bank in writing of any pending
or threatened litigation, judgment, administrative order, setoff, claims,
withholdings or other defenses with an individual value of
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<PAGE> 23
DM 100,000 or more to which the Borrower or any of its properties are or may
become subject, describing the nature thereof in reasonable detail.
9.10 RESTRICTIONS ON SALE AND LEASE BACK: The Borrower shall not
enter into any arrangement, directly or indirectly, whereby the Borrower shall
sell or transfer any property, in particular real property, owned by it in order
then or thereafter to lease such property or other property that the Borrower
intends to use for substantially the same purpose as the property being sold or
transferred, except for any such sale and lease back transactions entered into
with Simonds Industries Inc. or directly or indirectly wholly owned subsidiaries
of Simonds Industries Inc., which shall provide for a subordination of the
claims of the other party, and which shall require the express prior and written
consent of the Bank which consent shall not be unreasonably withheld.
9.11 CONSOLIDATION, MERGER AND SALE OF ASSETS: The Borrower shall
not merge or consolidate into or with any other person or convey, sell, lease or
otherwise dispose of all or substantially all of its assets.
9.12 LIQUIDATION: The Borrower shall not liquidate, dissolve or
wind up its affairs nor institute, consent to or fail promptly to contest
proceedings for any such purpose.
9.13 LOCAL BANK ACCOUNTS: The Borrower shall have the right to
maintain current accounts with Volksbank Hessisch-Lichtenau eG and/or
Kreissparkasse Kassel and/or Raiffeisenbank Spangenberg, Commerzbank Kassel,
Deutsche Bank Kassel, for the operation of its day-to-day business operations.
With the express prior and written consent of the Bank (which consent shall not
be unreasonably withheld) the Borrower shall have the right to open other
current accounts with other local banks for the operation of its day-to-day
business operations. Within two (2) weeks after the end of each calendar month
the Borrower shall (i) report to the Bank the balance on each of such local
current accounts by delivery to the Bank of the originals of the statements of
account received by the Borrower from such banks, and (ii) remit to its current
account with the Bank any credit balances standing on such local current
accounts which are in excess of an aggregate amount of DM 300,000.
10. REPRESENTATIONS AND WARRANTIES
The Borrower represents and warrants to the Bank as follows:
10.1 INCORPORATION; EXISTENCE: The Borrower is a company with
limited liability (GmbH) duly established and validly existing under the laws of
the Federal Republic of Germany. True and complete copies of the Articles of
Association as well as of the extract from the Commercial Register of the
Borrower reflecting the current state of registrations and facts which require
registration will be delivered by the Borrower on or prior to the Disbursement
Date. The Borrower does not hold any participations (shares, voting rights,
silent partnerships, etc.) in any corporation, partnership, or other entity.
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<PAGE> 24
10.2 AUTHORIZATION: The execution, delivery and performance of this
Agreement and the other Loan Documents to which the Borrower is or is to become
a party and the transactions contemplated hereby and thereby (i) are within the
corporate authority and legal right of the Borrower, (ii) have been duly
authorized by all necessary corporate proceedings, (iii) do not conflict with or
result in any breach or contravention of any provision of law, statute, rule or
regulation to which the Borrower is subject or any judgment, order, writ,
injunction, license or permit applicable to the Borrower, and (iv) do not
conflict with any provision of the Articles of Association of the Borrower of,
or any agreement or other instrument binding upon, the Borrower.
10.3 ENFORCEABILITY: The execution and delivery of this Agreement
and the other Loan Documents to which the Borrower is or is to become a party
will result in valid and legally binding obligations of the Borrower enforceable
against the Borrower in accordance with the respective terms and provisions
hereof and thereof, except as enforceability is limited by bankruptcy,
insolvency, reorganization, moratorium or other laws relating to or affecting
generally the enforcement of creditors' rights and except to the extent that
availability of the remedy of specific performance or injunctive relief is
subject to the discretion of the court before which any proceeding therefor may
be brought.
10.4 GOVERNMENTAL APPROVALS: The execution, delivery and
performance by the Borrower of this Agreement and the other Loan Documents to
which the Borrower is or is to become a party and the transactions contemplated
hereby and thereby do not require the Borrower to obtain the approval or consent
of, to make a filing with, or to perform or obtain the performance of any other
act by or in respect of any governmental agency or authority.
10.5 TITLE TO PROPERTIES; LEASES: Except for the assets
specifically excluded from the transfer of title for security purposes pursuant
to Exhibit 4 to the Security Transfer Agreement, the Borrower owns all of the
assets reflected in the As-If-Opening-Balance-Sheet of the Borrower as at the
Balance Sheet Date or acquired since that date (except property and assets sold
or otherwise disposed of in the ordinary course of business since that date),
subject to no rights of others, including any mortgages, land charges, leases,
conditional sales agreements, title retention agreements, liens, charges or
other encumbrances, except for Permitted Liens. The Borrower enjoys peaceful and
undisturbed possession under all leases under which it is operating, and all
said leases are valid and subsisting and in full force and effect.
10.6 FINANCIAL STATEMENTS; SOLVENCY:
10.6.1 The Borrower has furnished to the Bank the
As-If-Opening-Balance-Sheet as at the Balance Sheet Date. The
Als-Ob-Eroffnungsbilanz has been prepared in accordance with applicable
law and generally accepted accounting principles in Germany
consistently applied and is correct and complete in all material
respects and fairly presents the financial condition of the Borrower as
at the Balance Sheet Date. The Als-Ob-Eroffnungsbilanz has been
correctly translated into the As-If-Opening-Balance-Sheet in compliance
with U.S. formate and GAAP. There are no contingent liabilities of the
Borrower as of the Balance Sheet Date or incurred thereafter involving
material
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<PAGE> 25
amounts, known to the Borrower and not disclosed in said balance sheets
and the related notes thereto.
10.6.2 The Borrower (both before and after giving effect to
the transactions contemplated hereby) is solvent, has assets having a
fair value in excess of the amount required to pay its probable
liabilities on its existing debts as they become absolute and matured,
and has, and will have, access to adequate capital for the conduct of
its business and the ability to pay its debts from time to time
incurred in connection therewith as such debts mature.
10.7 NO MATERIAL CHANGES, ETC.: Since the Balance Sheet Date there
has occurred (a) no materially adverse change in the financial condition or
business or prospects of the Borrower as shown on or reflected in the
As-If-Opening-Balance-Sheet as at the Balance Sheet Date, or (b) no change which
could reasonably be expected to affect materially and adversely the projections
of cash flow for the fiscal year ending December 31, 1993.
10.8 FRANCHISES, PATENTS, COPYRIGHTS, ETC.: The Borrower possesses
or has a valid right to use all franchises, patents, copyrights, inventions,
technology, trademark registrations, trademarks, trade names, trade secrets,
service marks, licenses and permits, and rights in respect of the foregoing and
patent and trademark applications and rights in respect thereto (collectively,
the "Proprietary Rights"), adequate for the conduct of its business
substantially as now conducted without known conflict with any rights of others.
The Borrower is not aware of any existing or threatened infringement or
misappropriation of (a) any Proprietary Rights of others, or (b) any Proprietary
Rights of the Borrower by others, in any way which could reasonably be expected
to have a material adverse effect on the business, assets or condition or
prospects, financial or otherwise, of the Borrower.
10.9 NO LITIGATION: There are no actions, suits, proceedings or
investigations of any kind with a value of DM 100,000 or more in the individual
case pending or, to the best of the Borrower's knowledge, threatened against the
Borrower before any court, tribunal or administrative agency or board that, if
adversely determined, could reasonably be expected, either in any case or in the
aggregate, to materially adversely affect the properties, assets, financial
condition or business or prospects of the Borrower or materially impair the
right of the Borrower to carry on business substantially as now conducted by it,
or result in any substantial liability not adequately covered by insurance, or
for which adequate reserves are not maintained on the balance sheet of the
Borrower, or which question the validity of this Agreement or any of the other
Loan Documents to which the Borrower is or is to become a party, or any action
taken or to be taken pursuant hereto or thereto.
10.10 NO MATERIALLY ADVERSE CONTRACTS, ETC.: The Borrower is not a
party to any contract or agreement that has or, to the best of the Borrower's
knowledge, is expected to have any materially adverse effect on the business or
prospects of the Borrower.
10.11 COMPLIANCE WITH OTHER INSTRUMENTS, LAWS, ETC.: The Borrower is
not in violation of any provision of its corporate documents, or any agreement
or instrument to which it is subject
24
<PAGE> 26
or by which it or any of its properties are bound, or any law, rule, regulation,
decree, order, judgment, statute license, in any of the foregoing cases in a
manner that could result in the imposition of substantial penalties or could
reasonably be expected to materially and adversely affect the financial
condition, properties or business of the Borrower or the Borrower's ability to
perform the obligations hereunder.
10.12 TAX STATUS: The Borrower (a) made or filed all tax returns
(including, without limitation, all VAT tax returns), reports and declarations
required by any jurisdiction to which it is subject, or properly filed for and
received extensions with respect thereto which are still in full force and
effect and which have been fully complied with in all material respects, (b)
paid all taxes and other governmental duties or charges shown or determined to
be due on such returns, reports and declarations, except those being contested
in good faith by appropriate proceedings and for which adequate reserves, to the
extent required by applicable law or generally accepted accounting principles in
Germany, have been established, and (c) set aside on its books provisions
reasonably adequate for the payment of all taxes for periods subsequent to the
periods to which such returns, reports or declarations apply. There are no
unpaid taxes or other governmental duties or charges in any material amount
claimed to be due by any taxing or other authority of any jurisdiction, and the
officers of the Borrower know of no basis for any such claim.
10.13 NO EVENT OF DEFAULT: No Event of Default has occurred and is
continuing.
10.14 ABSENCE OF FINANCING STATEMENTS, ETC.: Except with respect to
Permitted Liens, there is no financing statement, security agreement, real
estate mortgage or other document filed or recorded with any filing records,
registry or other public office, or otherwise created by the Borrower that
purports to cover, affect or give notice of any present or possible future lien
on, or security interest or charge in, any assets or property of the Borrower or
rights thereunder.
10.15 ARM'S LENGTH TRANSACTIONS: All transactions between the
Borrower and the Guarantors or any other affiliate are made and carried out upon
terms no more or less favourable than the Borrower could obtain from third
parties (arm's length).
10.16 REAL ESTATE: The Real Estate, the buildings erected thereon,
and all other fixtures and fittings thereof, have been properly maintained, and
no substantial maintenance or repair is outstanding. The buildings have been
erected in accordance with applicable formal and substantive building laws and
regulations, and comply with generally accepted standards of technique and
construction.
10.17 ENVIRONMENTAL COMPLIANCE:
10.17.1 The Borrower is not in violation of any judgment,
decree, order, law, license, rule or regulation pertaining to
environmental matters.
10.17.2 No portion of any of the Real Estate has been used
for the handling, processing, storage or disposal of hazardous
substances and no underground tank or other
25
<PAGE> 27
underground storage receptacle for hazardous substances is located on
such properties; (ii) in the course of its activities, the Borrower has
not generated or is generating any hazardous waste on any of the Real
Estate; and (iii) there have been no releases (i.e., any past or
present releasing, spilling, leaking, pumping, pouring, emitting,
emptying, discharging, injecting, escaping, leaching, disposing or
dumping) of hazardous substances by the Borrower on, upon or into any
of the Real Estate, which releases could have an adverse effect on the
value of such properties. In addition, to the best of the Borrower's
knowledge, there have been no such releases on, upon or into any real
property in the vicinity of any of the Real Estate that, through soil
or groundwater contamination, may be located on and that could
reasonably be expected to have a materially adverse effect on the value
of any of the Real Estate.
10.18 DISCLOSURE: No representation or warranty made by the Borrower
in this Agreement or any of the Loan Documents to which the Borrower is or is to
become a party or in any other document furnished from time to time in
connection herewith or therewith contains any misrepresentation of a material
fact or omits to state any material fact necessary to make the statements herein
or therein not misleading. There is no fact known to the Borrower that
materially adversely affects, the business, property or financial condition or
prospects of the Borrower.
10.19 REPETITION: Each of the above representations and warranties
will be correct and complied with in all respects at any point in time so long
as any sum remains to be lent or remains payable under this Agreement or any of
the Loan Documents to which the Borrower is or is to become a party as if
repeated by reference to the then existing circumstances, except that each
reference to Financial Statements in Clause 10.6 shall be construed as a
reference to the then latest available annual financial statements.
11. SURVIVAL OF COVENANTS; DISCLOSURE
11.1 SURVIVAL OF COVENANTS: All covenants, agreements,
representations and warranties made herein, in any of the other Loan Documents
or in any documents or other papers delivered by or on behalf of the Borrower
pursuant thereto shall be deemed to have been relied upon by the Bank,
notwithstanding any investigation heretofore or hereafter made by it, and shall
survive the making by the Bank of the Term Loan or other extension of credit, as
herein contemplated, and shall continue in full force and effect so long as any
obligation of the Borrower under this Agreement or any Loan Document remains
outstanding or the Bank has any obligation to extend credit thereunder. All
statements contained in any certificate or other paper delivered to the Bank at
any time by or on behalf of the Borrower pursuant hereto or in connection with
the transactions contemplated hereby shall constitute representations and
warranties by the Borrower hereunder.
11.2 DISCLOSURE: The circumstances correctly and completely
disclosed in SCHEDULE 3 hereto shall not constitute a breach of any of the
representations and warranties set forth in Clause 10 above, provided, however,
that (i) the storing and ground tanks described in items 2 and 3 of Schedule 3
are not in violation of the representations and warranties given in Clause
26
<PAGE> 28
10.17.1 above, and (ii) if any of the circumstances described in item 1 of
Schedule 3 individually, or all of the circumstances described in item 1 of
Schedule 3 in the aggregate, require the Borrower to spend (as capital
expenditure, fine, fees, or otherwise) an amount or amounts in the aggregate of
DM 150,000 or more, the circumstances or any of them shall, although disclosed,
constitute an Event of Default in the meaning of Clause 12 below.
12. DEFAULT
12.1 EVENTS OF DEFAULT: Each of the following events shall
constitute an Event of Default:
12.1.1 NON-PAYMENT: The Borrower will not pay when and in
the manner provided in this Agreement or any other Loan Document to
which the Borrower is or is to become a party any sums payable to the
Bank.
12.1.2 BREACH OF WARRANTY: Any representation, warranty or
statement by the Borrower in this Agreement or any other Loan Document
to which the Borrower is or is to become a party is not complied with
or is or proves to have been incorrect in any respect when made or, if
it had been made on a later date by reference to the circumstances then
existing, would have been incorrect in any respect on that later date,
provided, that in the event of a breach of any of the warranties
specified in Clause 10.5 or 10.17 (which breach must not have a value
of DM 100,000 or more in the individual case) the Borrower shall have
the right to cure the breach within two (2) weeks upon becoming aware
thereof exercising the care of a prudent businessman.
12.1.3 BREACH OF UNDERTAKING: The Borrower will not perform
or comply with any one or more of its obligations under Clause 9 above,
provided, that in the event of a breach of the covenants undertaken by
the Borrower in Clause 9.6 above (which breach must not have a value of
DM 100,000 or more in the individual case) the Borrower shall have the
right to cure the breach within two (2) weeks upon becoming aware
thereof exercising the care of a prudent businessman.
12.1.4 BREACH OF OTHER OBLIGATION: The Borrower will not
perform or comply with any one or more of its other obligations under
or in connection with this Agreement or any of the other Loan Documents
to which the Borrower is or is to become a party, except for minor
defects which shall be cured by the Borrower promptly upon the
occurrence thereof.
12.1.5 BREACH OF GUARANTEE; CROSS DEFAULT: Any of the
Guarantors will not perform or comply with any one or more of its
obligations under or in connection with the Guarantee or any other
contract, agreement, or other arrangement with the Bank; or any
condition or event will occur which constitutes a default or which,
with the giving of notice or the lapse of time, or both, constitutes a
default under the terms of the Fleet Agreement or the MCRC Agreement.
27
<PAGE> 29
12.1.6 SHAREHOLDER OF THE BORROWER: The Borrower ceases to
be a directly or indirectly wholly owned subsidiary of Simonds
Industries Inc.
12.1.7 INSOLVENCY: The Borrower or any of the Guarantors
becomes insolvent, is unable to pay its debts as they fall due, stops,
suspends or threatens to stop or suspend payment of all or a material
part of its debts, begins negotiations or takes any proceedings or
other step with a view to re-adjustment, rescheduling or deferral of
all of its indebtedness (or of any part of its indebtedness which it
will or might otherwise be unable to pay when due) or proposes or makes
a general assignment or an arrangement or composition with or for the
benefit of its creditors or a moratorium is agreed or declared in
respect of or affecting all or a material part of the indebtedness of
the Borrower or any of the Guarantors.
12.1.8 SECURITY ENFORCEABLE: Any present or future security
on or over the assets of the Borrower or any of the Guarantors becomes
enforceable.
12.1.9 DISSOLUTION: Any step is taken by any person for the
dissolution or bankruptcy or composition proceedings of the Borrower or
any of the Guarantors or for the appointment of a receiver, trustee or
similar officer of the Borrower or any of the Guarantors or of any of
their respective assets.
12.1.10 AUTHORIZATIONS AND CONSENTS: Any action or condition
at any time required to be taken, fulfilled or done for any of the
purposes of this Agreement or any of the Loan Documents is not taken,
fulfilled or done or any such consent is not complied with.
12.1.11 ANALOGOUS EVENTS: Any event occurs which, under the
law of any relevant jurisdiction, has an analogous or equivalent effect
to any of the events specified in this Clause 12.
12.1.12 MATERIAL ADVERSE CHANGE: Any event occurs or
circumstances arise which give(s) reasonable grounds in the opinion of
the Bank for believing that the Borrower or any of the Guarantors may
not (or may be unable to) perform or comply with any one or more of
their respective obligations under this Agreement, the Guarantee or any
other Loan Document.
12.1.13 FAILURE TO REFINANCE: Volksbank Spangenberg
Zweigniederlassung der Volksbank Hessisch-Lichtenau eG will not, in
form and contents satisfactory to the Bank, execute the Assignment of
Land Charges Hessisch-Lichtenau and the statement pursuant to Clause
3.2.1 within two (2) weeks from the date of this Agreement.
12.2 CANCELLATION/ACCELERATION: At any time upon the occurrence of
an Event of Default and for as long as the same remains to be continuing, the
Bank shall be entitled, by written notice to the Borrower to declare:
28
<PAGE> 30
12.2.1 the Working Capital Line Facility to be cancelled,
whereupon it shall be cancelled; and/or
12.2.2 the Term Loan and any amounts outstanding under the
Working Capital Line Facility to be immediately due and payable,
whereupon they shall become so due and payable.
13. EXPENSES
Whether or not the Term Loan or any amounts under the Working Capital
Line Facility will be disbursed under this Agreement, the Borrower shall pay:
13.1 INITIAL EXPENSES: on demand, all costs and expenses (including
taxes thereon and fees for legal and other professional advisers) incurred by
the Bank in connection with the preparation, negotiation, entering into of this
Agreement and the other Loan Document and/or any amendment of or waiver in
respect of this Agreement and the other Loan Document; and
13.2 ENFORCEMENT EXPENSES: on demand, all costs and expenses
(including taxes thereon and fees for legal and other professional advisers)
incurred by the Bank in protecting or enforcing any rights under or in
connection with this Agreement and/or the other Loan Documents and/or any
amendment or waiver thereof.
14. ASSIGNMENT
14.1 BENEFIT AND BURDEN OF THIS AGREEMENT: This Agreement and the
other Loan Documents shall benefit and be binding on the parties, their
respective successors and any permitted assignee or transferee of some or all of
a party's rights or obligations thereunder. Any reference in this Agreement to
any party shall be construed accordingly.
14.2 BORROWER: The Borrower may not assign or transfer all or part
of its rights or obligations under this Agreement or any other Loan Document to
which the Borrower is or is to become a party.
14.3 BANK: The Bank may assign or otherwise transfer its rights and
obligations under this Agreement and the other Loan Documents, or sell
participations in any interest therein, to any other person or entity, and such
other person or entity shall thereupon become vested, to the extent set forth in
the agreement evidencing such assignment, transfer or participation, with all
the rights and obligations of the Bank in respect thereof. However, under no
circumstances shall the Bank (i) hold less than 50% of the total outstandings
from the Borrower under or in connection with this Agreement at the time of the
assignment, transfer or sale of participation, or (ii) substitute any other
institution as the agent (of a group of lenders) for purposes of this Agreement.
15. COMMUNICATIONS
29
<PAGE> 31
15.1 ADDRESSES: Each communication under this Agreement shall be
made by telex, telefax (to be followed by a hard copy) or otherwise in writing.
Each communication or document to be delivered to any party under this Agreement
shall be sent to that party at the telex or telefax number or address, and
marked for the attention of the person (if any), from time to time designated by
that party to the other party. The initial telex or telefax number, address and
person (if any) so designated by each party are as follows:
THE BORROWER: WESPA Metallsagenfabrik
Simonds Industries GmbH
Lochmuhle 3
3509 Spangenberg
Telex Nr.: 99939 wespa d
Telefax Nr.: 05663/50666
Attn.: Geschaftsfuhrung
THE BANK: The First National Bank of Boston
Zweigniederlassung Frankfurt
Friedrich-Ebert-Anlage 2-14
(City-Haus)
6000 Frankfurt am Main
Telefax Nr.: 069/7545-240
Attn.: Commercial Banking
15.2 LANGUAGE: All communications and documents shall be in
English.
16. MISCELLANEOUS
16.1 CONDITION PRECEDENT: The validity and becoming effective of
this Agreement is conditional upon the execution, in form and substance
satisfactory to the Bank, of an intercreditor agreement between the Bank (Boston
Office) and Fleet Bank of Massachusetts, N.A.
16.2 NO IMPLIED WAIVERS, REMEDIES CUMULATIVE: No failure on the
part of the Bank to exercise, and no delay on its part in exercising, any right
or remedy under this Agreement or the other Loan Documents will operate as a
waiver thereof, nor will any single or partial exercise of any right or remedy
preclude any other or further exercise thereof or the exercise of any other
right or remedy. The rights and remedies provided in this Agreement or the other
Loan Documents are cumulative and not exclusive of any rights or remedies
provided by law.
16.3 FORM: This Agreement supersedes all prior negotiations and
agreements between the parties concerning the subject matter of this Agreement
and can be modified or amended only by written instrument signed by all parties
unless a stricter form is required by mandatory law. This form requirement shall
also apply to any change, modification or waiver of the form requirement set
forth in the preceding sentence.
30
<PAGE> 32
16.4 SEVERABILITY: Should any or several provisions of this
Agreement be or become invalid or impracticable in whole or in part, this shall
not affect the validity of the remaining provisions of this Agreement. In this
event, the invalid or impracticable provision is deemed replaced by a provision
which corresponds to the spirit and the purpose of the invalid or impracticable
provision to the greatest extent possible. In the event of gaps in this
Agreement, if any, the gap shall be deemed filled by such provisions which the
parties would have reasonably agreed upon in the light of the spirit and purpose
reflected in this Agreement had they been aware of the gap at the outset.
16.5 COUNTERPARTS: This Agreement may be signed in any number of
counterparts, all of which taken together and when delivered to the Bank shall
constitute one and the same instrument.
16.6 GENERAL BUSINESS TERMS: To the extent no provision has been
made in this Agreement, the General Business Terms of the Bank shall apply to
this Agreement a copy of which is attached hereto as SCHEDULE 4.
16.7 GOVERNING LAW: This Agreement shall be governed by and
construed in accordance with the laws of the Federal Republic of Germany.
16.8 JURISDICTION: In relation to any legal action or proceedings
arising out of or in connection with this Agreement, the Borrower irrevocably
and for the benefit of the Bank submits to the jurisdiction of the District
Court (Landgericht) in Frankfurt am Main.
16.9 SUBMISSION NOT TO AFFECT: This submission shall not affect the
right of the Bank to take proceedings in any other competent jurisdiction.
16.10 SERVICE OF PROCESS: The Borrower hereby accepts its
appointment as agent for service of process for Simonds Holding Company Inc. or
Simonds Industries Inc. in certain of the Loan Documents.
WESPA Metallsagenfabrik Simonds Industries GmbH by:
/s/
- -----------------------------------------
The First National Bank of Boston by:
/s/
- -----------------------------------------
31
<PAGE> 1
EXHIBIT 4.5
W. NOTTING LIMITED
SHARE PURCHASE AGREEMENT DATED MAY___, 1998
EXHIBITS AND SCHEDULES
EXHIBIT 1.3(ii) - PROMISSORY NOTE
DATED ___________ MAY, 1998
INSTRUMENT
CONSTITUTING THE ISSUE OF
(POUND)L,000,000 LOAN NOTES 1998 (SERIES 1)
OF
TIME ECLIPSE LIMITED
SI HOLDING CORPORATION, GUARANTOR
<PAGE> 2
W. NOTTING LIMITED
SHARE PURCHASE AGREEMENT DATED MAY___, 1998
EXHIBITS AND SCHEDULES
TABLE OF CONTENTS
PARTIES
OPERATIVE PROVISIONS
1. DEFINITIONS AND INTERPRETATIONS
2. AMOUNT AND STATUS OF NOTES
3. INTEREST
4. REDEMPTION OF NOTES
5. CERTIFICATES
6. SURRENDER AND CANCELLATION
7. REPRESENTATIONS AND WARRANTIES
8. COVENANTS OF THE COMPANY
9. EVENTS OF DEFAULT
10 REGISTRATION
11. TITLE OF NOTEHOLDERS
12. TRANSFER OF NOTES
13. TRANSMISSION OF NOTES
14. PRESCRIPTION
15. MEETINGS
16. ALTERATION OF THIS INSTRUMENT
17. FURTHER LOAN CAPITAL
18. NOTICES
19. GENERAL
20. SET OFF
21. EVIDENCE
22. LAW
SCHEDULE 1
SCHEDULE 2
GUARANTY
<PAGE> 3
W. NOTTING LIMITED
SHARE PURCHASE AGREEMENT DATED MAY___, 1998
EXHIBITS AND SCHEDULES
_____________ MAY 1998
PARTIES
TIME ECLIPSE LIMITED (NO. 3494408)
WHOSE REGISTERED OFFICE IS AT UNIT 3
MOTORWAY INDUSTRIAL ESTATE, SHEFFIELD S9 1DH ENGLAND
(HEREINAFTER, THE "COMPANY")
SI HOLDING CORPORATION, AS GUARANTOR
A DELAWARE CORPORATION WITH PRINCIPAL OFFICES AT
900 MARKET STREET, WILMINGTON, DE USA
INTRODUCTION
(A) Pursuant to its Memorandum and Articles of Association, and by
resolution of its board of directors, dated April ____, 1998, the Company
resolved to create, and by this Instrument, to constitute (pound)1,000,000 in
nominal amount of Loan Notes 1998 (Series 1).
(B) This Instrument and the Schedules constitute the Notes.
OPERATIVE PROVISIONS
1.0 DEFINITIONS AND INTERPRETATIONS.
1.1 In this Instrument and the Schedules, the following expressions,
unless the content requires otherwise:
"Business Day" means a day (excluding Saturdays, Sundays and
any public holiday) on which banks are open for business in the City of London;
"Directors" means the board of directors of the Company for
the time being;
"Certificate" means a certificate for Notes issued in
accordance with Clause 2 and substantially in the form set out in Schedule 1;
"Event of Default" means any of the events provided for in
Clause 9;
"Extraordinary Resolution" means a resolution passed on a show
of hands by a majority of not less than three-quarters of the Noteholders
present and voting at a meeting of Noteholders, or if a poll is demanded, either
by the chairman of the meeting or by Noteholders
<PAGE> 4
W. NOTTING LIMITED
SHARE PURCHASE AGREEMENT DATED MAY___, 1998
EXHIBITS AND SCHEDULES
holding not less than one-tenth in nominal amount of the Notes for the time
being outstanding, by a majority of not less than three-quarters in number of
the votes given on that poll;
"Guaranty" means a guarantee of even date provided by the
Guarantor to the Noteholders for certain obligations of the Company under the
Notes, a copy of which is annexed as Schedule 2;
"Guarantor" means SI Holding Corporation, a corporation
organized and existing under the laws of Delaware, USA;
"Notes" means the (pound)l,000,000 Loan Notes 1998 (Series 1)
of the Company constituted by this Instrument or the nominal amount of them for
the time being outstanding or as the context may require a specific portion of
them, which Notes are given by the Company in partial consideration of its
purchase of all the outstanding and issued shares of the W. Notting Limited
pursuant to the Share Purchase Agreement;
"Noteholders" means the several persons for the time being
entered in the Register as holders of the Notes, which Noteholders are all the
selling holders of all the outstanding and issued shares of W.
Notting Limited;
"Noteholders' Solicitors" means Shoosmiths & Harrison,
Lockhouse, Castle Meadow Road, Nottingham NG2 1AG ENGLAND.
"Pounds Sterling" and "(pound)" mean the lawful currency from
time to time of the United Kingdom;
"Register" means the register of Notes and Noteholders to be
maintained by the Company pursuant to Clause 10;
"Repayment Date" means 30 April 1999;
"Share Purchase Agreement" means a certain share sale and
purchase agreement dated the date hereof and made between Company and all the
shareholders of W. Notting Limited, which shareholders are all the present
Noteholders, pursuant to which the Company is purchasing all the outstanding and
issued shares of W.
Notting Limited;
"Subsidiary" means a subsidiary within the meaning of Section
736 of the Companies Act 1985; and
1.2 Words denoting the singular shall include the plural and vice
versa. Words denoting the masculine gender shall include the feminine and neuter
genders and vice versa.
2
<PAGE> 5
W. NOTTING LIMITED
SHARE PURCHASE AGREEMENT DATED MAY___, 1998
EXHIBITS AND SCHEDULES
References to persons shall include bodies corporate, unincorporated
associations and partnerships. References to any statute or statutory provision
shall include any statute or statutory provision which amends, consolidates,
extends or replaces the same.
1.3 Words and phrases defined in the Companies Act 1985 shall, save as
expressly provided in this Instrument, have the same meanings in this Instrument
and the Schedules.
1.4 References to Clauses and Schedules shall be to Clauses of, and the
Schedules to, this Instrument. Headings in this Instrument are inserted for ease
of reference only and shall not affect its interpretation.
1.5 The word "redemption" includes purchase and repayment, and the
words "redeem" or "redeemed" shall be construed accordingly.
1.6 The words "this Instrument" refer to the provisions of this
Instrument and the Schedules to the Instrument (as from time to time modified
under the terms of this Instrument) and any deed expressed to be supplemental to
this Instrument.
2.0 AMOUNT AND STATUS OF NOTES.
2.1 The principal amount of the Notes is limited to (pound)l,000,000.
The Notes shall be issued in denominations and integral multiples of (pound)1 in
nominal amount, subject to, and with the benefit of, the provisions of this
Instrument. All the obligations and covenants contained in this Instrument shall
be binding on the Company and the Noteholders, and all persons claiming through
them.
2.2 The Notes constitute direct, unconditional, unsecured and
unsubordinated obligations of the Company and rank, and will rank, pari passu
without any discrimination or preference among themselves and (except for
statutory preferred debt) at least pari passu with all other unsecured
indebtedness, which is not subordinated, of the Company.
2.3 The Notes and certain interest and other sums payable under, or in
respect of, the Notes shall be guaranteed by the Guarantor pursuant to the
Guaranty.
2.4 The Notes shall not be offered to the public for subscription or
purchase and shall not be capable of being dealt in on any stock exchange in the
United Kingdom or elsewhere. No application has been, or shall be, made to any
stock exchange for permission to deal in or for the listing or quotation of the
Notes.
3
<PAGE> 6
W. NOTTING LIMITED
SHARE PURCHASE AGREEMENT DATED MAY___, 1998
EXHIBITS AND SCHEDULES
3.0 INTEREST.
3.1 The Notes will carry interest at eight and one-half percent (8.5%)
per annum. Such interest will accrue daily, from the date hereof, in arrears on
the basis of a year of 365 days. The first accrued interest payment will be
payable on 31 October 1998. Interest accruing after 31 October 1998 will be
payable in arrears on 30 April 1999.
3.2 For so long as interest payable on the Notes is by law payable
under deduction or withholding of tax, the Company shall deliver up to the
Noteholders, in respect of the interest paid to the Noteholders, within 14 days
after payment of any such interest, a certificate as to the gross amount of such
payment and the amount of tax deducted or withheld.
3.3 Subject to the provisions of Clause 3.2 and Clause 20, save as
otherwise required by law, all payments, whether of principal, interest or other
amounts due in relation to the Notes, shall be paid in full, free of any
withholding, deduction, set-off or counterclaim.
4.0 REDEMPTION OF NOTES.
4.1 All Notes not previously redeemed by the Company in accordance with
the provisions of this Instrument will be repaid in Pounds Sterling together
with accrued interest (after deduction of tax under Clause 3.2 and set-off under
Clause 20) on the Repayment Date.
4.2 The Notes shall not be subject to redemption by the
Company prior to the Repayment Date.
4.3 The Notes shall, subject to Clause 9 relating to Events of Default,
be subject to call for redemption by any Noteholder subsequent to the Repayment
Date.
4.4 Payment of all or part of the principal and accrued interest on any
Notes may be made by cheque or telegraphic transfer, or any other method of
payment agreed between the Company and the Noteholders, from time to time, to
the bank account designated for such purpose with the Noteholders' Solicitors.
Every such cheque may be sent through the post at the risk of the holder, or
joint holders, to the address of the Noteholders' Solicitors.
5.0 CERTIFICATES.
5.1 The Company shall issue duly executed Certificates for the Notes.
The Certificates shall be in the form, or substantially in the form, set out in
Schedule I and shall have attached to each of them a copy of this Instrument.
4
<PAGE> 7
W. NOTTING LIMITED
SHARE PURCHASE AGREEMENT DATED MAY___, 1998
EXHIBITS AND SCHEDULES
5.2 The Certificates for the Notes shall be issued in accordance with
the provisions of the Articles of Association for the time being of the Company
relating to the issue of certificates for securities of the Company.
5.3 Each Noteholder, or the joint holders, of any Note shall be
entitled without charge to one Certificate for the total amount of the Note
registered in his name, or their names, or, if he or they desire, to several
such certificates each for a part (being (pound)l in nominal value of the Notes
or an integral multiple thereof) of the Notes so registered upon payment of the
sum of (pound)l for every Certificate beyond the first. Any Certificate in the
names of such joint holders of any Note shall be delivered to the first named of
such joint holders in the Register unless all such joint holders otherwise
specify in writing to the Company.
5.4 If any Certificate is defaced, worn out, lost or destroyed, the
Company shall issue a new Certificate on payment of such fee not exceeding
(pound)1 and on such terms (if any) as the directors may require as to indemnity
and evidence of defacement, wearing out, loss or destruction. In the case of
defacement or wearing out, the defaced or worn out Certificate shall be
surrendered and canceled before the new Certificate is issued. In the case of
loss or destruction, the person availing himself of the provisions of this
Clause shall also pay to the Company (if demanded) all reasonable expenses
incidental to the investigation of evidence of loss or destruction and the
preparation of any form of indemnity. There shall be entered in the Register
particulars of the issue of any new Certificate and any indemnity.
6.0 SURRENDER AND CANCELLATION.
6.1 Notes shall only be redeemed against surrender of the relevant
Certificate(s) for cancellation in the case of full redemption and for the
enfacement of a memorandum of the amount and date of redemption in the case of
partial redemption.
6.2 All Notes redeemed by the Company under the provisions of this
Instrument shall be canceled and shall not be reissued.
7.0 Warranties. The Company warrants to each Noteholder that at the date hereof:
7.1 Company has full power to issue and perform its obligations under
the Notes, to borrow and repay up to the maximum amount of the Notes and has
obtained, and will maintain in effect, all consents necessary for the foregoing
purposes.
7.2 The issue of the Notes does not and will not constitute an event of
default under any agreement, document or instrument to which it is a party, or a
breach of its Memorandum of Association.
7.3 No event has occurred which constitutes an Event of Default.
5
<PAGE> 8
W. NOTTING LIMITED
SHARE PURCHASE AGREEMENT DATED MAY___, 1998
EXHIBITS AND SCHEDULES
8.0 COVENANTS BY THE COMPANY. So long as any of the Notes remains outstanding,
the Company covenants as follows:
8.1 Company will at all times perform and comply with its obligations
set out in this Instrument and the Certificates.
8.2 Company will at all times carry on and conduct its affairs in a
proper and efficient manner.
8.3 Company will send to the Noteholders' Solicitors free of charge a
copy of every balance sheet, profit and loss account report, circular, notice
and document issued or sent generally to the members, or holders of securities
other than its members, of the Company in each case as soon as practical after
issue or publication.
8.4 Company will procure a consolidated balance sheet of the Company
and its Affiliates, including the Guarantor, to be prepared and audited in
respect of each of its financial periods and copies be sent to the Noteholders's
Solicitors within 120 days of the end of each financial period.
8.5 Company will not take any steps or actions which impair or
adversely affect the enforceability of this Instrument.
9.0 EVENTS OF DEFAULT.
9.1 The Notes shall become immediately repayable, together with any
accrued interest (after deductions permitted in this Instrument) up to, but
excluding, the date of redemption on the occurrence of any of the following
events, to the extent that any of these events continues to exist after the
Sellers' Committee (as defined in the Share Purchase Agreement) has provided
written notice of same to the Company:
9.1.1 any principal or interest on any Note is not paid within
7 days of its due date for payment; or
9.1.2 the Company fails to comply with any other terms of this
Instrument or the Notes and that failure is not remedied or, where capable of
remedy, remains unremedied for twenty-one (21) days; or
9.1.3 the Company ceases, or threatens to cease, to carry on
its business or a substantial part of its business, except as a result of a
winding up pursuant to a scheme previously approved by Extraordinary Resolution
of the Noteholders; or
6
<PAGE> 9
W. NOTTING LIMITED
SHARE PURCHASE AGREEMENT DATED MAY___, 1998
EXHIBITS AND SCHEDULES
9.1.4 the Company is, or is adjudicated or found to be,
insolvent or is (or is deemed to be) unable to, or admits inability to, pay its
debts (within the meaning of Section 123(l) of the Insolvency Act 1986) or
proposes or enters into any composition or other arrangement for the benefit of
its creditors generally; or
9.1.5 any order is made by any competent court or any
resolution is passed by the Company for the winding up or dissolution, or for
the appointment of a liquidator of the Company (except for the purpose of a
solvent amalgamation or reconstruction previously approved by Extraordinary
Resolution of the Noteholders); or
9.1.6 any encumbrancer takes possession, or a receiver,
administrative receiver, manager or sequestrator is appointed of the whole or
any substantial part of the undertaking or assets of the company, or distress or
other process is levied or enforced upon any of the assets, rights or revenues
of the Company and any such action is not lifted or discharged within fourteen
(14) days; or
9.1.7 any order is made by any competent court for the
appointment of an administrator in relation to the Company.
9.2 The Company shall forthwith give notice to each Noteholder of the happening
of any event mentioned in Clause 9.1, et seq, upon becoming aware of same.
10.0 REGISTRATION.
10.1 Every Noteholder shall receive, on the date hereof, a Certificate
stating the nominal amount of the Note held by him/her/it. Every Certificate
shall bear a denoting number. Joint Noteholders will be entitled only to one (1)
Certificate in respect of the Note held by them jointly, and the same will be
delivered to the first named of such joint holders.
10.2 The Company shall at all times maintain the Register at its
registered office or at such other place as the Company may from time to time
decide, and there shall be entered in the Register (i) the names and addresses
of the Noteholders; (ii) the amount of the Notes held by each registered holder;
(iii) the date at which the name of every such registered holder is entered in
respect of the Notes standing in his name; (iv) the endorsements in respect of
each Note; and (v) the serial number of each Certificate issued and its date of
issue.
10.3 Each Noteholder shall notify the Company of any change of his name
or address, and the Company, upon receiving such notification, shall alter the
Register accordingly.
10.4 The Register shall at all times prescribed by law be open for
inspection by the Noteholders, or any of them, or in the case of a corporation
by any person authorized in writing
7
<PAGE> 10
W. NOTTING LIMITED
SHARE PURCHASE AGREEMENT DATED MAY___, 1998
EXHIBITS AND SCHEDULES
by the Noteholder, provided that the Register may be closed by the Company for
not more than thirty (30) days in any one calendar year.
11.0 TITLE OF NOTEHOLDERS.
11.1 The Company will recognize the registered holder(s) of any Notes
as the absolute owner(s) and as alone entitled to receive and give effectual
discharge for the monies comprised therein. The Company will not be bound to
take notice of, or to see to the execution of, any trust, whether express,
implied or constructive, to which any Notes may be subject. The receipt of the
holder(s) for the moneys payable on repayment, and of a holder (or in the case
of joint holdings of any one of the holders) for interest, shall be a good
discharge to the Company notwithstanding any notice it may have, whether express
or otherwise, of the right, title, interest or claim of any other person to, or
in, such Notes, interest or moneys. No notice of any trust, whether express,
implied or constructive, in respect of any Notes, shall (except as provided by
statute or as required by an order of a court of competent jurisdiction) be
entered on the Register.
11.2 Every Noteholder shall be entitled to the principal amount of his
Notes and accrued interest (after deductions permitted in this Instrument) free
from all claims, liens, charges, encumbrances and any equity set-off or
cross-claim on the part of the Company against the original or any intermediate
holder of the Notes, except as expressly provided otherwise in this Instrument.
11.3 If several persons are entered in the Register as joint holders of
any Notes, the receipt by any one of such persons for any monies from time to
time payable in respect of such Notes shall be as effective a discharge to the
Company as if the person signing such receipt were the sole registered holder of
such Notes.
11.4 The Company shall recognize the executors and administrators of a
sole registered holder of a Note as the only persons having any title or
interest in such Note on the death of such Noteholder. The Company shall
recognize the survivor or survivors of joint registered holders of a Note as the
only person or persons having any title or interest in such Note on the death of
one or more of such joint registered holders.
12.0 TRANSFER OF NOTES. The Notes are not assignable or otherwise transferable.
13.0 TRANSMISSION OF NOTES. Any person becoming entitled to any Notes in
consequence of the death or bankruptcy of any Noteholder, or of any other event
giving rise to the transmission of such Notes by operation of law, may be
registered as the holder thereof upon such evidence of his title being produced
as the directors of Company may reasonably require. The Company may in its sole
discretion, retain any payments on such a Note until the person entitled to be
registered under this Clause has been duly registered under the provisions of
this Instrument.
8
<PAGE> 11
W. NOTTING LIMITED
SHARE PURCHASE AGREEMENT DATED MAY___, 1998
EXHIBITS AND SCHEDULES
14.0 PRESCRIPTION. The Company shall be discharged from its obligation to pay
principal on the Notes, or accrued interest thereon, to the extent that the
relevant Notes have not been surrendered to the Company by, or payment has been
made by a Pounds Sterling cheque which remains uncashed at, the end of the
period of twelve (12) years from the due date in respect of such payment.
15.0 MEETINGS.
15.1 The Company may at any time convene a meeting of the Noteholders
by giving at least twenty-one (21) days' prior written notice of the meeting to
Noteholders. A meeting shall have power by an Extraordinary Resolution to
sanction with the consent of the Company any modification, abrogation or
compromise in respect of the rights of the Noteholders against the Company. A
resolution in writing signed by the holders of at least three-quarters in
nominal amount of the Notes shall be as effective as an Extraordinary Resolution
duly passed at a meeting of the Noteholders.
15.2 Any meeting for the purpose of Clause 15.1 shall (unless otherwise
specifically provided) be convened, conducted and held in all respects as nearly
as possible in the same way as shall be provided by the Articles of Association
of the Company with regard to general meetings, but:
15.2.1 a member of the Company shall not be entitled to
receive notice of, or to attend or vote, at any such meeting unless he be a
Noteholder;
15.2.2 the quorum at any such meeting shall be persons holding
or representing by proxy, one-third in nominal amount of the Notes (but if at
any adjourned meeting a quorum, as so defined, is not present, those Noteholders
who are present shall be a quorum), and
15.2.3 if a poll is demanded, each (pound)1 in nominal amount
of Notes held shall confer one (1) vote.
In the case of joint holders, the vote of the senior who
tenders a vote whether in person or by proxy shall be accepted to the exclusion
of the votes of the other joint holders, and for this purpose, seniority shall
be determined by the order in which the names stand in the Register in respect
of the joint holding. A person appointed to act as a proxy need not be a
Noteholder.
15.3 If within fifteen (15) minutes from the time appointed for the
meeting, a quorum is not present, the meeting shall stand adjourned to such day
(not being less than fourteen nor more than twenty-eight days after the date of
the meeting from which such adjournment takes place), time and place as the
chairman of the meeting shall direct. At least seven (7) days' notice shall be
given of an adjourned meeting, and such notice shall state that the Noteholders
present,
9
<PAGE> 12
W. NOTTING LIMITED
SHARE PURCHASE AGREEMENT DATED MAY___, 1998
EXHIBITS AND SCHEDULES
whatever their number, or the Notes held or represented by them, will
constitute a quorum for all purposes.
16.0 ALTERATION OF THIS INSTRUMENT. The provisions of this Instrument, and the
conditions on which the Notes are held, may be altered, abrogated or added to
with the consent in writing of the Company and an Extraordinary Resolution of
the Noteholders.
17.0 FURTHER LOAN CAPITAL. The Company reserves absolutely and unconditionally
the power to create and issue at its discretion from time to time further loan
capital ranking pari passu with, or subordinate to the Notes, for cash or
otherwise, at par or at a premium or discount, and with or without rights of
conversion into, or subscription for, shares of the Company and carrying such
rights as to premium, interest, maturity, repayment and otherwise as the Company
shall think fit.
18.0 NOTICES. Any notice under, or in respect of, this Instrument shall be
provided as set forth in SECTION 7.3 of the Share Purchase Agreement:
to Company, as to Purchaser in said Share Purchase Agreement, and
to Noteholders, as to Sellers in said Share Purchase Agreement with
respect to notices relating to Warranties, the Tax Covenant or the Indemnified
Liabilities, as defined in the Share Purchase Agreement.
19.0 GENERAL. A copy of this Instrument shall be supplied free of charge to each
Noteholder on receipt by the Company of a written request from such Noteholder.
20.0 SET-OFF. Amounts otherwise due the Noteholders hereunder are subject to the
right of set-off in favor of the Company as set forth in the Share Purchase
Agreement.
21.0 LAW. This Instrument, the Schedules and the Notes shall be governed by, and
construed in accordance with, English law. The Company, the Guarantor and the
Noteholders accept the non-exclusive jurisdiction of the appropriate court of
law in England in relation to all matters, claims or disputes arising out of, or
in connection with, the terms of this Instrument and the Notes.
10
<PAGE> 13
W. NOTTING LIMITED
SHARE PURCHASE AGREEMENT DATED MAY___, 1998
EXHIBITS AND SCHEDULES
IN WITNESS WHEREOF, this Instrument has been executed and delivered as a DEED by
the company on the day and year first above written.
EXECUTED as a deed by Time Eclipse Limited)
acting by )
- ----------------------------
Joseph L Sylvia
Managing Director
ATTEST,
- ----------------------------
David P. Witman Secretary
Secretary
11
<PAGE> 14
W. NOTTING LIMITED
SHARE PURCHASE AGREEMENT DATED MAY___, 1998
EXHIBITS AND SCHEDULES
SCHEDULE 1 - THE CERTIFICATES
SERIES 1
Each holder of the Notes shall be entitled to a Certificate stating the
amount of the Notes held by him. Every Certificate shall be in the following, or
substantially the following, form and shall be executed and delivered by the
Company.
CERTIFICATE NO. ____
CERTIFICATE FOR (POUND) __________ NOMINAL OF NOTES (THE "NOMINAL AMOUNT")
TIME ECLIPSE LIMITED
(THE "COMPANY")
(INCORPORATED UNDER THE COMPANIES ACT 1985, 1989)
(REGISTERED NO. _________)
(POUND)1,000,000
LOAN NOTES 1998 SERIES 1
(THE "NOTES")
Issued under the authority of the Memorandum and Articles of
Association of the Company and pursuant to a resolution of its board of
directors passed on this date.
THIS IS TO CERTIFY THAT ________________________________
of ____________________________________________________
is/are the registered holder(s) of the above stated Nominal Amount of
the Notes, fully paid, constituted by an Instrument entered into by the Company
on this date (the "Instrument") and are issued with the benefit of, and subject
to, the provisions contained in the Instrument, a copy of which may be obtained
from the Company.
12
<PAGE> 15
W. NOTTING LIMITED
SHARE PURCHASE AGREEMENT DATED MAY___, 1998
EXHIBITS AND SCHEDULES
Words and expressions defined in the Instrument shall have the same
meanings in this Certificate.
DATED: ______ May 1998
Executed and delivered as a deed by
Time Eclipse Limited, by
-----------------------------
Joseph L. Sylvia
Managing Director
ATTEST,
-----------------------------
David P. Witman
Secretary
Notes:
1. The Notes are redeemable in accordance with the terms and conditions
contained in the Instrument which is available from the Company.
2. Subject to the terms of the Instrument, the Notes are subject to
restrictions against disposals.
ISSUED IN ENGLAND
13
<PAGE> 16
W. NOTTING LIMITED
SHARE PURCHASE AGREEMENT DATED MAY___, 1998
EXHIBITS AND SCHEDULES
<TABLE>
<CAPTION>
Noteholders Nominal Amounts
- ----------- ---------------
<S> <C>
Georgina Miller 122,060
Penelope Christine Gaisford St. Lawrence 117,394
Platinum Holdings Limited 89,487
Marcris Holdings Limited 82,929
Valerie Drew 67,572
Ronald Francis Kirby 57,492
Thomas Nigel Miller 56,929
Lady Davis 52,296
Joanna Marie Drew 50,778
Bibury Investment Holding Inc. 44,875
Timothy Douglas Ian Drew 39,791
Patrick Arnold Drew 34,926
G. Miller and Dr. T.N. Miller 26,092
Dagmar Paton 23,948
Paul Malcolm Ruse 14,746
Paul Sewell 13,097
Hon L. Miller 12,127
Dennis Stephen Parker 10,672
Kenneth Trickett 9,944
Michael Johnson 6,791
Timothy John Drew 6,156
David Graham Drew 5,748
Marcus Guy Drew 5,457
Christopher Marcus Roy Drew 5,457
Robin Patrick Barry Drew 5,457
Sally Elizabeth Drew 5,161
Simon Drew 5,161
M.T. Roxby Bott 4,800
Mary Thorndike Drew 3,490
John Greville Drew 2,910
Jane Elisabeth Merrick-Johnson 2,910
Elena F.L. Miller 2,425
David E.B. Miller 2,425
Avril J.V. Miller 2,425
Alexander H.J. Miller 2,425
Matthew T.V. Miller 2,425
J.T. Gaisford St. Lawrence 728
Nicholas Blews Robotham 486
Total (pound)1,000,000
</TABLE>
14
<PAGE> 17
W. NOTTING LIMITED
SHARE PURCHASE AGREEMENT DATED MAY___, 1998
EXHIBITS AND SCHEDULES
SCHEDULE 2 - THE GUARANTY
SERIES 1
The Guaranty is as set forth in SECTION 7.17 of the Share Purchase
Agreement, incorporated herein by reference.
DATED: ____ May 1998
Executed and delivered as a deed by
SI Holding Corporation, by
-----------------------------
Joseph L Sylvia
Director/Chief Financial Officer /Executive Vice President
ATTEST,
-----------------------------
David P. Witman
Secretary
15
<PAGE> 18
W. NOTTING LIMITED
SHARE PURCHASE AGREEMENT DATED MAY___, 1998
EXHIBITS AND SCHEDULES
July 22, 1998
Mr. Michael Johnson
The Needham Partnership
9 Needham Road
London, W I I 2RP England
Dear Michael:
On behalf of the Sellers, Paul Sewell has just delivered to us for our
review the Completion Financial Statement, copy attached, as well as his
analysis of the adjustment to be made to the Purchase Price in accordance with
Section 1.2 of the Share Purchase Agreement.
We have reviewed the Completion Financial Statement and are in
agreement with it.
Accordingly, Section 1. 1 of the Share Purchase Agreement is hereby
modified to restate the Purchase Price at GBP 4,144,581 in that the Section 1.2
adjustment off the Completion Financial Statement is GBP 105,419. Consistently
then, the amount of the Note as set forth in Section 1.3(ii) of the Share
Purchase Agreement, as well as the principal amount on the Note itself, is
hereby restated as BGP 894,581. Attached hereto as EXHIBIT A is the revised
Schedule of Noteholders under the Note which should be attached to the original
Note in substitution for the former Schedule of Noteholders.
Best regards,
JJ.L. Sylvia
JLS/bm
Attachments
cc: R. George
D. Witman
H. Gorgi
R. Small
D. Tilly
N. Thorne
16
<PAGE> 19
17
<PAGE> 1
EXHIBIT 4.6
$100,000,000
SIMONDS INDUSTRIES INC.
10 1/4% SENIOR SUBORDINATED NOTES DUE 2008
PURCHASE AGREEMENT
June 30, 1998
SALOMON BROTHERS INC
FIRST UNION CAPITAL MARKETS,
a division of Wheat First Securities, Inc.
SCHRODER & CO. INC.
c/o Salomon Brothers Inc
Seven World Trade Center
New York, New York 10048
Dear Sirs:
SIMONDS INDUSTRIES INC., a Delaware corporation (the "Company"),
proposes, upon the terms and conditions set forth herein, to issue and sell to
Salomon Brothers Inc, First Union Capital Markets, a division of Wheat First
Securities, Inc., and Schroder & Co. Inc. (the "Initial Purchasers")
$100,000,000 aggregate principal amount of its 10 1/4% Senior Subordinated Notes
due 2008 (the "Notes"). The Notes will be guaranteed (each, a "Guarantee") on a
senior subordinated basis by each of Armstrong Manufacturing Company, an Oregon
corporation, Simonds Holding Company, Inc., a Delaware corporation, and Simonds
Industries FSC, Inc., a U.S. Virgin Islands corporation (each, a "Guarantor").
The Notes and the Guarantees are referred to herein as the "Securities." The
Securities will be issued pursuant to an indenture, to be dated as of July 7,
1998 (the "Indenture"), among the Company, the Guarantors and State Street Bank
and Trust Company, as trustee (the "Trustee").
The Company and the Guarantors wish to confirm as follows their
agreement with the Initial Purchasers in connection with the purchase and resale
of the Securities.
<PAGE> 2
1. PRELIMINARY OFFERING MEMORANDUM AND OFFERING MEMORANDUM. The
Securities will be offered and sold to the Initial Purchasers without
registration under the Securities Act of 1933, as amended (the "Act"), in
reliance on an exemption pursuant to Section 4(2) under the Act and the rules
and regulations promulgated thereunder. The Company has prepared a preliminary
offering memorandum, dated June 15, 1998 (the "Preliminary Offering
Memorandum"), and an offering memorandum, dated June 30, 1998 (the "Offering
Memorandum"), setting forth information regarding the Company and the
Securities. Unless stated herein to the contrary, all references herein to the
Offering Memorandum are to the Offering Memorandum at the date thereof and are
not meant to include any supplement or amendment subsequent thereto. The Company
hereby confirms that it has authorized the use of the Preliminary Offering
Memorandum and the Offering Memorandum in connection with the offering and
resale of the Securities by the Initial Purchasers on the terms and subject to
the conditions set forth herein.
The Company understands that the Initial Purchasers propose to make
offers and sales ("Exempt Resales") of the Securities purchased by the Initial
Purchasers hereunder only on the terms and in the manner set forth in the
Offering Memorandum and Section 2 hereof, as soon as the Initial Purchasers deem
advisable after this Agreement has been executed and delivered, (i) to persons
in the United States whom the Initial Purchasers reasonably believe to be
qualified institutional buyers ("Qualified Institutional Buyers") as defined in
Rule 144A under the Act, as such rule may be amended from time to time ("Rule
144A"), in transactions under Rule 144A and (ii) outside the United States to
persons other than U.S. persons in reliance upon and in compliance with
Regulation S under the Act, as such regulation may be amended from time to time
("Regulation S"). The persons specified in clauses (i) and (ii) are referred to
herein as the "Eligible Purchasers." As used herein, the terms "United States"
and "U.S. persons" have the respective meanings given them in Regulation S.
- 2 -
<PAGE> 3
It is understood and acknowledged that upon original issuance thereof,
and until such time as the same is no longer required under the applicable
requirements of the Act, each of the Securities (and each security issued in
exchange therefor or in substitution thereof) shall bear the following legend:
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR
SOLD EXCEPT AS SET FORTH BELOW. BY ITS ACQUISITION HEREOF, THE HOLDER (1)
REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN
RULE 144A UNDER THE SECURITIES ACT) OR (B) IT IS AN INSTITUTIONAL
"ACCREDITED INVESTOR" (AS DEFINED IN RULE 501(a)(1), (2), (3) OR (7) UNDER
THE SECURITIES ACT (AN "ACCREDITED INVESTOR")) OR (C) IT IS NOT A U.S.
PERSON AND IS ACQUIRING THIS SECURITY IN AN OFFSHORE TRANSACTION, (2)
AGREES THAT IT WILL NOT WITHIN TWO YEARS AFTER THE ORIGINAL ISSUANCE OF
THIS SECURITY RESELL OR OTHERWISE TRANSFER THIS SECURITY EXCEPT (A) TO THE
ISSUER OR ANY SUBSIDIARY THEREOF, (B) INSIDE THE UNITED STATES TO A
QUALIFIED INSTITUTIONAL BUYER IN COMPLIANCE WITH RULE 144A UNDER THE
SECURITIES ACT, (C) INSIDE THE UNITED STATES TO AN ACCREDITED INVESTOR
THAT, PRIOR TO SUCH TRANSFER, FURNISHES TO THE TRUSTEE A SIGNED LETTER
CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS (THE FORM OF WHICH LETTER
CAN BE OBTAINED FROM THE TRUSTEE), (D) OUTSIDE THE UNITED STATES TO PERSONS
OTHER THAN U.S. PERSONS IN OFFSHORE TRANSACTIONS MEETING THE REQUIREMENTS
OF RULE 904 UNDER REGULATION S UNDER THE SECURITIES ACT, (E) PURSUANT TO
THE EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144 UNDER THE SECURITIES
ACT (IF AVAILABLE) OR (F) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE SECURITIES ACT AND (3) AGREES THAT IT WILL GIVE TO EACH PERSON TO
WHOM THIS SECURITY IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF
THIS LEGEND. AS USED HEREIN, THE TERMS "OFFSHORE TRANSACTION," "UNITED
STATES" AND "U.S. PERSON" HAVE
- 3 -
<PAGE> 4
THE RESPECTIVE MEANINGS GIVEN TO THEM BY REGULATION S UNDER THE SECURITIES
ACT.
It is also understood and acknowledged that holders (including
subsequent transferees) of the Securities will have the registration rights set
forth in the registration rights agreement (the "Registration Rights Agreement")
substantially in the form attached hereto as EXHIBIT A to be dated as of the
Closing Date (as defined) by and among the Company, the Guarantors and the
Initial Purchasers.
2. AGREEMENTS TO SELL, PURCHASE AND RESELL.
(a) The Company hereby agrees, upon the basis of the
representations, warranties and agreements of the Initial Purchasers herein
contained and subject to all the terms and conditions set forth herein, to issue
and sell to the Initial Purchasers and, upon the basis of the representations,
warranties and agreements of the Company and the Guarantors herein contained and
subject to all the terms and conditions set forth herein, each Initial
Purchaser, severally and not jointly, agrees to purchase from the Company that
principal amount of Notes set forth opposite the name of such Initial Purchaser
on SCHEDULE I attached hereto at a purchase price of 97% of the principal amount
thereof.
(b) Each Initial Purchaser represents and warrants to the Company
and the Guarantors that it is a Qualified Institutional Buyer with such
knowledge and experience in financial and business matters as are necessary to
evaluate the merits and risks of an investment in the Securities, it has
received all of the information it considers necessary or appropriate for
deciding whether to make an investment in the Securities, and has advised the
Company that it proposes to offer the Securities for resale upon the terms and
conditions set forth in this Agreement and in the Offering Memorandum in Exempt
Resales. Each Initial Purchaser hereby represents and warrants to, and agrees
with, the Company and the Guarantors that it (i) will not solicit offers for, or
offer to sell, the Securities by means of any form of general solicitation or
general advertising or in any manner involving a public
- 4 -
<PAGE> 5
offering within the meaning of Section 4(2) of the Act (including, but not
limited to, (A) any advertisement, article, notice or other communication
published in any newspaper, magazine or similar media or broadcast over
television or radio, or (B) any seminar or meeting whose attendees have been
invited by any general solicitation or general advertising; PROVIDED, HOWEVER,
that such limitation shall not preclude the Initial Purchasers from placing any
tombstone announcement with respect to the resale by the Initial Purchasers of
the Securities, PROVIDED that such announcement is not prohibited by (and is in
compliance with) Regulation S), and (ii) will solicit offers for the Securities
only from, and will offer, sell or deliver the Securities as part of its initial
offering, only to (A) persons in the United States whom such Initial Purchaser
reasonably believes to be Qualified Institutional Buyers purchasing for their
own accounts, or if any such person is buying for one or more institutional
accounts for which such person is acting as fiduciary or agent, only when such
person has represented to such Initial Purchaser that each such account is a
Qualified Institutional Buyer, to whom notice has been given that such sale or
delivery is being made in reliance on Rule 144A, in each case, in transactions
under Rule 144A and (B) outside the United States to persons other than U.S.
persons in reliance on Regulation S. Each Initial Purchaser has advised the
Company that it will offer the Securities to Eligible Purchasers at a price
initially equal to 100% of the principal amount thereof, plus accrued interest,
if any, from the date of original issuance of the Securities.
(c) Each Initial Purchaser represents and warrants that (i) it has
not offered or sold, and will not offer or sell, directly or indirectly, any of
the Securities in the United Kingdom by means of any document, other than to
persons whose ordinary business it is to buy or sell shares or debentures
whether as principal or agent (except in circumstances which do not constitute
an offer to the public within the meaning of the Companies Act 1985), (ii) it
has complied with and will comply with all applicable provisions of the
Financial Services Act of 1986 with respect to anything done by such Initial
Purchaser in relation to the Securities
- 5 -
<PAGE> 6
in, from or otherwise involving the United Kingdom and (iii) it has only issued
or passed on and will only issue or pass on in or from the United Kingdom to any
persons any document received by such Initial Purchaser in connection with the
issue of the Securities if the recipient is of a kind described in Article 9(3)
of the Financial Services Act of 1986 (Investment Advertisements) (Exemptions)
Order 1988, as amended.
(d) Each Initial Purchaser represents and warrants that with respect
to Securities offered and sold or to be offered and sold pursuant to Regulation
S it has offered and sold the Securities and agrees that it will offer and sell
the Securities (i) as part of its initial distribution at any time and (ii)
otherwise until 40 days after the later of the commencement of the offering of
the Securities and the Closing Date, only in accordance with Rule 903 of
Regulation S. Accordingly, each Initial Purchaser represents, warrants and
agrees that with respect to Securities offered and sold or to be offered and
sold pursuant to Regulation S none of it, its affiliates or any persons acting
on its behalf or on behalf of its affiliates have engaged or will engage in any
directed selling efforts in the United States with respect to the Securities,
and it and its affiliates have complied and will comply with the offering
restrictions requirements of Regulation S. Each Initial Purchaser agrees that,
at or prior to confirmation of any sale of Securities pursuant to Regulation S,
it will have sent to each distributor, dealer or person receiving a selling
concession, fee or other remuneration that purchases such Securities from it
during the restricted period a confirmation or notice to substantially the
following effect:
The Securities covered hereby have not been registered under the U.S.
Securities Act of 1933, as amended (the "Securities Act"), and may not be
offered and sold within the United States or to, or for the account or
benefit of, U.S. persons (i) as part of their initial distribution at any
time or (ii) otherwise until 40 days after the later of the commencement of
the offering and the Closing Date, except in either case in accordance with
Regulation S
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<PAGE> 7
or Rule 144A under the Securities Act. Terms used above have the respective
meanings given to them in Regulation S under the Securities Act.
Each Initial Purchaser understands that the Company and, for the
purposes of the opinions to be delivered to the Initial Purchasers pursuant to
Section 7(d) and 7(e) hereof, counsel to the Company and counsel to the Initial
Purchasers will rely upon the accuracy and truth of the foregoing
representations and agreements and each Initial Purchaser hereby consents to
such reliance.
3. DELIVERY OF THE SECURITIES AND PAYMENT THEREFOR. Delivery to the
Initial Purchasers of and payment for the Securities shall be made at the office
of Cahill Gordon & Reindel, 80 Pine Street, New York, New York at 9:00 a.m., New
York City time, on July 7, 1998 (the "Closing Date"). The place of closing for
the Securities and the Closing Date may be varied by agreement between the
Initial Purchasers and the Company.
The Securities will be delivered to the Initial Purchasers against
payment of the purchase price therefor by federal funds certified check or wire
transfer, in each case, of immediately available funds payable in accordance
with written instructions from the Company. The Securities will be evidenced by
one or more global securities (each, a "Global Security") and/or by additional
certificated securities, and will be registered, in the case of a Global
Security, in the name of Cede & Co. as nominee of The Depository Trust Company
("DTC"), and in the other cases, in such names and in such denominations as the
Initial Purchasers shall request prior to 1:00 p.m., New York City time, on the
business day preceding the Closing Date. The Securities to be delivered to the
Initial Purchasers shall be made available to the Initial Purchasers in New York
City for inspection and packaging not later than 9:30 a.m., New York City time,
on the business day next preceding the Closing Date.
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<PAGE> 8
4. AGREEMENTS OF THE COMPANY AND THE GUARANTORS. The Company and the
Guarantors agree with the Initial Purchasers as follows:
(a) Until the completion of the distribution of the Securities by the
Initial Purchasers to Eligible Purchasers, the Company will advise the
Initial Purchasers promptly and, if requested, will confirm such advice in
writing, of any material adverse change in the condition (financial or
other), business, prospects, properties, net worth or results of operations
of the Company and its Subsidiaries (as defined), taken as a whole, or of
the happening of any event or the existence of any condition which requires
any amendment or supplement to the Offering Memorandum (as then amended or
supplemented) so that the Offering Memorandum (x) will not contain any
untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein,
in the light of the circumstances under which they were made, not
misleading, or (y) will comply with applicable law.
(b) The Company will furnish to the Initial Purchasers, without
charge, such number of copies of the Offering Memorandum, as they may then
be amended or supplemented, as they may reasonably request.
(c) The Company will not make any amendment or supplement to the
Preliminary Offering Memorandum or to the Offering Memorandum of which the
Initial Purchasers shall not previously have been advised or to which they
shall object in writing after being so advised unless, in the opinion of
counsel to the Company, such amendment or supplement is necessary to comply
with applicable law.
(d) Prior to the execution and delivery of this Agreement, the
Company has delivered or will deliver to the Initial Purchasers, without
charge, in such reasonable quantities as the Initial Purchasers shall have
requested or may hereafter request, copies of the Preliminary Offering
Memorandum. The Company consents to the use, in
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<PAGE> 9
accordance with the securities or Blue Sky laws of the jurisdictions in
which the Securities are offered by the Initial Purchasers and by dealers,
prior to the date of the Offering Memorandum, of each Preliminary Offering
Memorandum so furnished by the Company. The Company consents to the use of
the Offering Memorandum (and of any amendment or supplement thereto
prepared in accordance with Section 4(c)) in accordance with the securities
or Blue Sky laws of the jurisdictions in which the Securities are offered
by the Initial Purchasers and by all dealers to whom Securities may be
sold, in connection with the offering and sale of the Securities.
(e) If, at any time prior to completion of the distribution of the
Securities by the Initial Purchasers to Eligible Purchasers, any event
shall occur or condition shall exist that in the judgment of the Company or
in the opinion of the Initial Purchasers based on advice of counsel
requires any amendment or supplement to the Offering Memorandum (as then
amended or supplemented) so that the Offering Memorandum (x) will not
contain any untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements
therein, in the light of the circumstances under which they were made, not
misleading, or (y) will comply with applicable law, the Company will, in
each such case subject to Section 4(c), forthwith prepare an appropriate
supplement or amendment thereto, and will expeditiously furnish to the
Initial Purchasers that number of copies thereof as they shall reasonably
request.
(f) The Company will cooperate with the Initial Purchasers and with
their counsel in connection with the qualification of the Securities for
offering and sale by the Initial Purchasers and by dealers under the
securities or Blue Sky laws of such jurisdictions as the Initial Purchasers
may designate and will file such consents to service of process or other
documents necessary or appropriate in order to effect such qualification;
PROVIDED that in no event shall the Company be obligated
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<PAGE> 10
to qualify to do business in any jurisdiction where it is not now so
qualified or to take any action which would subject it to general service
of process in any jurisdiction where it is not now so subject.
(g) So long as any of the Securities are outstanding, the Company
will furnish to the Initial Purchasers (i) as soon as reasonably
practicable, a copy of each report of the Company filed with the Securities
and Exchange Commission (the "Commission") and (ii) from time to time such
other information concerning the Company as the Initial Purchasers may
reasonably request.
(h) The Company will apply the proceeds from the sale of the
Securities to be sold by it hereunder in accordance with the description
set forth under "Use of Proceeds" in the Offering Memorandum.
(i) The Company has not taken, nor will it take, directly or
indirectly, any action designed to or that might reasonably be expected to
cause or result in stabilization or manipulation of the price of the
Securities to facilitate the sale or resale of the Securities. Except as
permitted by the Act, the Company will not distribute any offering material
in connection with the Exempt Resales. Except following the effectiveness
of the Exchange Offer Registration Statement or the Shelf Registration
Statement (each as defined in the Registration Rights Agreement), the
Company will not solicit any offers to buy and will not offer to sell the
Securities by means of any form of general solicitation or general
advertising (within the meaning of Regulation D under the Act) or by means
of any directed selling efforts (as defined under Regulation S and the
Commission's releases related thereto).
(j) The Company will assist the Initial Purchasers in causing the
Securities to be eligible for trading on the PORTAL market.
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<PAGE> 11
(k) From and after the Closing Date, so long as any of the Securities
are outstanding and are "restricted securities" within the meaning of Rule
144(a)(3) under the Act or, if earlier, until two years after the Closing
Date, and during any period in which the Company is not subject to Section
13 or 15(d) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), the Company will furnish to holders of the Securities and
prospective purchasers of Securities designated by such holders, upon
request of such holders or such prospective purchasers, the information
required to be delivered pursuant to Rule 144A(d)(4) under the Act to
permit compliance with Rule 144A in connection with resales of the
Securities.
(l) The Company agrees not to sell, offer for sale or solicit offers
to buy or otherwise negotiate in respect of any security (as defined in the
Act) that would be integrated with the sale of the Securities in a manner
that would require the registration under the Act of the sale by the
Company to the Initial Purchasers or by the Initial Purchasers to the
Eligible Purchasers of the Securities.
(m) The Company and the Guarantors agree to comply with all of the
terms and conditions of the Registration Rights Agreement, and all
agreements set forth in the representation letters of the Company to DTC
relating to the approval of the Securities by DTC for "book entry"
transfer.
(n) The Company agrees that not later than any registration of the
Securities pursuant to the Registration Rights Agreement, or at such
earlier time as may be so required, the Company shall use its best efforts
to cause the Indenture to be qualified under the Trust Indenture Act of
1939 (the "1939 Act") and will cause to be entered into any necessary
supplemental indentures in connection therewith.
(o) The Company shall not resell any Securities that have been
acquired by it.
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<PAGE> 12
(p) Prior to the Closing Date, the Company will furnish to the
Initial Purchasers, as soon as reasonably practicable after they have been
prepared, a copy of any unaudited interim consolidated financial statements
of the Company for any period subsequent to the period covered by the most
recent consolidated financial statements of the Company appearing in the
Offering Memorandum.
5. REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE GUARANTORS.
The Company and the Guarantors, jointly and severally, represent and warrant to
the Initial Purchasers that:
(a) No order or decree preventing the use of the Preliminary Offering
Memorandum or the Offering Memorandum or any amendment or supplement
thereto, or any order asserting that the transactions contemplated by this
Agreement are subject to the registration requirements of the Act, has been
issued and no proceeding for any such purpose has been commenced or is
pending or, to the knowledge of the Company, is threatened.
(b) The Preliminary Offering Memorandum and the Offering Memorandum,
as of their respective dates, and the Offering Memorandum, as of the
Closing Date, did not or will not contain an untrue statement of a material
fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading, except that this representation
and warranty does not apply to statements in the Preliminary Offering
Memorandum and Offering Memorandum made in reliance upon and in conformity
with information relating to the Initial Purchasers furnished to the
Company in writing by the Initial Purchasers through Salomon Brothers Inc
expressly for use therein.
(c) As of the Closing Date, the Indenture will have been duly and
validly authorized by the Company and the Guarantors and, upon its
execution and delivery by the Company and the Guarantors, and assuming due
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<PAGE> 13
authorization, execution and delivery by the Trustee, will be a valid and
binding agreement of the Company and the Guarantors, enforceable in
accordance with its terms, except as enforcement thereof may be limited by
bankruptcy, insolvency or other similar laws affecting the enforcement of
creditors' rights generally and subject to the applicability of general
principles of equity; the Indenture conforms in all material respects to
the description thereof in the Offering Memorandum; and no qualification of
the Indenture under the 1939 Act is required in connection with the offer
and sale of the Securities contemplated hereby or in connection with the
Exempt Resales.
(d) As of the Closing Date, the Notes and the Guarantees will have
been duly authorized by the Company and the Guarantors, respectively, and,
when executed by the Company and the Guarantors, respectively, and (in the
case of the Notes) authenticated by the Trustee in accordance with the
Indenture and delivered to the Initial Purchasers against payment therefor
in accordance with the terms hereof, will have been validly issued and
delivered, and will constitute valid and binding obligations of the Company
and the Guarantors, respectively, entitled to the benefits of the Indenture
and enforceable in accordance with their terms, except as enforcement
thereof may be limited by bankruptcy, insolvency or other similar laws
affecting the enforcement of creditors' rights generally and subject to the
applicability of general principles of equity; and the Securities conform
in all material respects to the description thereof in the Offering
Memorandum.
(e) Each direct and indirect subsidiary of the Company is set forth
on SCHEDULE II attached hereto (each, a "Subsidiary"). All the outstanding
shares of capital stock of the Company and each Subsidiary have been duly
authorized and validly issued, are fully paid and nonassessable and are
free of any preemptive or similar rights.
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<PAGE> 14
(f) Each of the Company and the Subsidiaries is a corporation duly
organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation with full corporate power and authority to
own, lease and operate its properties and to conduct its business as
described in the Offering Memorandum, and is duly registered and qualified
to conduct its business and is in good standing in each jurisdiction where
the nature of its properties or the conduct of its business requires such
registration or qualification, except where the failure so to register or
qualify would not reasonably be expected to have a material adverse effect
on the condition (financial or other), business, prospects, properties net
worth or results of operations of the Company and the Subsidiaries, taken
as a whole (a "Material Adverse Effect").
(g) There are no legal or governmental proceedings pending against
the Company or any Subsidiary or, to the knowledge of the Company,
threatened against any of them or to which the Company or any Subsidiary or
to which any of the respective properties of the Company or any Subsidiary
is subject which are not disclosed in the Offering Memorandum and which, if
adversely decided, would cause a Material Adverse Effect or materially
adversely affect the issuance of the Securities or the consummation of any
of the transactions contemplated by this Agreement, the Indenture, the
Securities or the Registration Rights Agreement (collectively, the
"Transaction Documents"). There are no agreements, contracts, indentures,
leases or other instruments of the Company or any Subsidiary that are
material to the Company and the Subsidiaries, taken as a whole, which are
not described in the Offering Memorandum. Except as disclosed in the
Offering Memorandum, neither the Company nor any Subsidiary is involved in
any strike, job action or labor dispute with any group of its employees
which would reasonably be expected to have a Material Adverse Effect, and,
to the knowledge of the Company, no such action or dispute is threatened.
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<PAGE> 15
(h) None of the Company or any Subsidiary is (x) in violation of its
certificate or articles of incorporation or bylaws or other organizational
documents, or of any law, ordinance, administrative or governmental rule or
regulation applicable to it or of any decree of any court or governmental
agency or body having jurisdiction over it, except where any such violation
or violations in the aggregate could not reasonably be expected to have a
Material Adverse Effect, or (y) in default in the performance of any
obligation, agreement or condition contained in any bond, debenture, note
or any other evidence of indebtedness or in any agreement, indenture, lease
or other instrument to which the Company or any Subsidiary is a party or by
which any of them or any of their respective properties may be bound,
except as disclosed in the Offering Memorandum or where any such default or
defaults in the aggregate would not reasonably be expected to have a
Material Adverse Effect.
(i) None of (x) the issuance, offer, sale or delivery of the
Securities, (y) the execution, delivery or performance of the Transaction
Documents by the Company or any Subsidiary to the extent a party thereto,
or (z) the consummation by the Company or any Subsidiary of the
transactions contemplated hereby or thereby (i) requires any consent,
approval, authorization or other order of, or registration or filing with
(each, a "Consent"), any court, regulatory body, administrative agency or
other governmental body, agency or official (except such Consents as may
have been obtained or may be required in connection with the registration
under the Act of the Securities in accordance with the Registration Rights
Agreement, the qualification of the Indenture under the 1939 Act and except
for compliance with the securities or Blue Sky laws of various
jurisdictions or the failure to obtain which could not reasonably be
expected to have a Material Adverse Effect or materially adversely affect
the consummation of the transactions contemplated by the Transaction
Documents) or conflicts or will conflict with or constitutes or will
constitute a breach of, or a
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<PAGE> 16
default under, the certificate or articles of incorporation or bylaws, or
other organizational documents, of the Company or any Subsidiary, except
any such conflicts and breaches that in the aggregate could not reasonably
be expected to have a Material Adverse Effect, or (ii) conflicts or will
conflict with or constitutes or will constitute a breach of, or a default
under, any agreement, indenture, lease or other instrument to which the
Company or any Subsidiary is a party or by which any of them or any of
their respective properties may be bound, except as disclosed in the
Offering Memorandum or any such conflicts, breaches or defaults that in the
aggregate could not reasonably be expected to have a Material Adverse
Effect, or (iii) violates or will violate any statute, law, regulation or
judgment, injunction, order or decree applicable to the Company or any
Subsidiary or any of their respective properties, except any such
violations that in the aggregate could not reasonably be expected to have a
Material Adverse Effect, or (iv) will result in the creation or imposition
of any lien, charge or encumbrance upon any property or assets of the
Company or any Subsidiary pursuant to the terms of any agreement or
instrument to which any of them is a party or by which any of them may be
bound or to which any of their property or assets is subject, other than
liens, charges and encumbrances disclosed in the Offering Memorandum or
which could not in the aggregate be expected to have a Material Adverse
Effect.
(j) To the Company's knowledge, Arthur Andersen LLP, who have
certified the financial statements of the Company, included as part of the
Offering Memorandum, are independent public accountants under Rule 101 of
the AICPA's Code of Professional Conduct and its interpretations and
rulings.
(k) The financial statements of the Company included in the Offering
Memorandum, together with the related notes thereto, present fairly the
financial position, results of operations and cash flows of the Company at
the dates and for the periods to which they relate, and have
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<PAGE> 17
been prepared in accordance with generally accepted accounting principles
applied on a consistent basis ("GAAP"). The PRO FORMA financial statements
and other PRO FORMA financial information (including the notes thereto)
included in the Offering Memorandum (A) present fairly on the basis stated
the information shown therein, (B) have been prepared in accordance with
applicable requirements of Rule 11-02 of Regulation S-X promulgated under
the Act and (C) have been properly computed on the basis described therein.
The assumptions used in the preparation of the PRO FORMA financial
statements and other PRO FORMA financial information included in the
Offering Memorandum are reasonable and the adjustments used therein are
appropriate to give effect to the transactions or circumstances referred to
therein.
(l) Each of the Company and the Guarantors has all the requisite
corporate power and authority to execute, deliver and perform its
obligations under this Agreement and the Registration Rights Agreement; the
execution and delivery of, and the performance by each of the Company and
the Guarantors of its obligations under, this Agreement and the
Registration Rights Agreement have been duly and validly authorized by the
Company and the Guarantors and each of this Agreement and, as of the
Closing Date, the Registration Rights Agreement will have been duly
executed and delivered by each of the Company and the Guarantors and will
constitute the valid and legally binding agreement of each of the Company
and the Guarantors, enforceable against the Company and the Guarantors in
accordance with its terms, except as the enforcement hereof and thereof may
be limited by bankruptcy, insolvency or other similar laws affecting the
enforcement of creditors' rights generally and subject to the applicability
of general principles of equity, and except as rights to indemnity and
contribution hereunder and thereunder may be limited by Federal or state
securities laws or principles of public policy.
(m) Except as disclosed in the Offering Memorandum, subsequent to the
date as of which such information is
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<PAGE> 18
given in the Offering Memorandum, neither the Company nor any Subsidiary
has incurred any liability or obligation, direct or contingent, or entered
into any transaction, not in the ordinary course of business, that is
material or will be material to the Company and the Subsidiaries, taken as
a whole, and there has not been any material change in the capital stock,
or material increase in the short-term or long-term debt of the Company or
any Subsidiary.
(n) Each of the Company and the Subsidiaries has good and marketable
title to all property (real and personal) described in the Offering
Memorandum as being owned by it, free and clear of all liens, claims,
security interests or other encumbrances, except such as are described in
the Offering Memorandum or could not, in the aggregate, reasonably be
expected to have a Material Adverse Effect, and all the property described
in the Offering Memorandum as being held under lease by each of the Company
and the Subsidiaries is held by it under valid, subsisting and enforceable
leases, except as the enforcement thereof may be limited by bankruptcy,
insolvency, or similar laws affecting the enforcement of creditors' rights
generally and subject to the applicability of general principles of equity.
(o) Except as permitted by the Act, the Company has not distributed
and, prior to the later to occur of the Closing Date and completion of the
distribution of the Securities, will not distribute any offering material
in connection with the offering and sale of the Securities other than the
Preliminary Offering Memorandum and Offering Memorandum (and any amendment
or supplement thereto in accordance with Section 4(c) hereof).
(p) Each of the Company and the Subsidiaries has such permits,
licenses, franchises, certificates of need and other approvals or
authorizations of governmental or regulatory authorities ("Permits") as are
necessary under applicable law to own their respective properties and to
conduct their respective businesses in the manner
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<PAGE> 19
described in the Offering Memorandum, except to the extent that the failure
to have such Permits could not reasonably be expected to have a Material
Adverse Effect; each of the Company and the Subsidiaries has fulfilled and
performed in all material respects all its obligations with respect to the
Permits, and, to the knowledge of the Company, no event has occurred which
allows, or after notice or lapse of time would allow, revocation or
termination thereof or results in any other material impairment of the
rights of the holder of any such Permit, subject in each case to such
qualification as may be set forth in the Offering Memorandum and except to
the extent that any such revocation or termination, individually or in the
aggregate, could not reasonably be expected to have a Material Adverse
Effect.
(q) The Company maintains a system of internal accounting controls
sufficient to provide reasonable assurances that (i) transactions of the
Company and the Subsidiaries are executed in accordance with management's
general or specific authorization; (ii) transactions of the Company and the
Subsidiaries are recorded as necessary to permit preparation of financial
statements in conformity with GAAP and to maintain accountability for
assets; (iii) access to assets of the Company and the Subsidiaries is
permitted only in accordance with management's general or specific
authorization; and (iv) the recorded accountability for assets of the
Company and the Subsidiaries is compared with existing assets of the
Company and the Subsidiaries at reasonable intervals and appropriate action
is taken with respect to any differences.
(r) Neither the Company nor any Subsidiary nor, to the knowledge of
the Company, any employee or agent of the Company or any Subsidiary has
made any payment of funds or received or retained any funds in violation of
any law, rule or regulation, which violation could reasonably be expected
to have a Material Adverse Effect.
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<PAGE> 20
(s) Except as disclosed in the Offering Memorandum, the Company and
the Subsidiaries have filed all tax returns required to be filed (other
than filings being contested in good faith), which returns are true and
correct in all material respects, and neither of the Company nor any
Subsidiary is in default in the payment of any taxes which were payable
pursuant to said returns or any assessments with respect thereto (other
than taxes being contested in good faith), except where the failure to file
such returns and make such payments (whether or not being contested in good
faith) would not, individually or in the aggregate, reasonably be expected
to have a Material Adverse Effect.
(t) No holder of any security of the Company (other than holders of
the Securities) has any right to request or demand registration of any
security of the Company because of the consummation of the transactions
contemplated by the Transaction Documents.
(u) Each of the Company and the Subsidiaries owns or possesses
adequate rights to use all patents, trademarks, trademark registrations,
service marks, service mark registrations, trade names, copyrights,
licenses, inventions, trade secrets and rights described in the Offering
Memorandum as being owned by it or necessary for the conduct of its
business, and the Company has not received notice of any claim to the
contrary (a "Claim") or any challenge (a "Challenge") by any other person
to the rights of each of the Company and the Subsidiaries with respect to
the foregoing, except for such Claims and Challenges which could not
reasonably be expected to have a Material Adverse Effect.
(v) The Company is not and, upon sale of the Securities to be issued
and sold hereby in accordance herewith and the application of the net
proceeds to the Company of such sale as described in the Offering
Memorandum under the caption "Use of Proceeds," will not be an "investment
company" within the meaning of the Investment Company Act of 1940, as
amended.
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<PAGE> 21
(w) When the Securities are issued and delivered pursuant to this
Agreement, such Securities will not be of the same class (within the
meaning of Rule 144A(d)(3) under the Act) as any security of the Company
that is listed on a national securities exchange registered under Section 6
of the Exchange Act or that is quoted in a United States automated
interdealer quotation system.
(x) None of the Company nor any of its affiliates (as defined in Rule
501(b) of Regulation D under the Act) has directly, or through any agent
(PROVIDED that no representation is made as to the Initial Purchasers or
any person acting on their behalf), (i) sold, offered for sale, solicited
offers to buy or otherwise negotiated in respect of, any security (as
defined in the Act) which is or will be integrated with the offering and
sale of the Securities in a manner that would require the registration of
the Securities under the Act or (ii) engaged in any form of general
solicitation or general advertising (within the meaning of Regulation D
under the Act) in connection with the offering of the Securities.
(y) Assuming (i) the representations and warranties of the Initial
Purchasers in Section 2 hereof are true and correct in all material
respects, (ii) each Initial Purchaser complies with the covenants set forth
in Section 2 hereof, (iii) compliance by each Initial Purchaser with the
offering and transfer procedures and restrictions described in the Offering
Memorandum, (iv) the accuracy of the representations and warranties deemed
to be made in the Offering Memorandum by purchasers to whom the Initial
Purchasers initially resell Securities, and (v) purchasers to whom the
Initial Purchasers initially resell Securities receive a copy of the
Offering Memorandum prior to such sale, the purchase and sale of the
Securities pursuant hereto (including the Initial Purchasers' proposed
offering of the Securities on the terms and in the manner set forth in the
Offering Memorandum and Section 2 hereof) do not require registration under
the Act.
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<PAGE> 22
(z) The execution and delivery of this Agreement and the other
Transaction Documents and the sale of the Securities to the Initial
Purchasers by the Company and by the Initial Purchasers to Eligible
Purchasers in accordance with the terms hereof will not result in any
prohibited transaction within the meaning of Section 406 of ERISA or
Section 4975 of the Internal Revenue Code. The representations made by the
Company in the preceding sentence are made in reliance upon and subject to
the accuracy of, and compliance with, the representations and covenants
made or deemed made by the Eligible Purchasers as set forth in the Offering
Memorandum under the section entitled "Transfer Restrictions."
(aa) Except as disclosed or contemplated by the Offering Memorandum,
each of the Company and the Subsidiaries is in compliance with, and not
subject to any liability under, any applicable federal, state, local and
foreign statute, regulation, rule, codes, ordinances, directives and orders
relating to pollution or to protection of public or employee health or
safety or to the environment, including, without limitation, those that
relate to any Hazardous Material (as defined herein ("Environmental
Laws")), except, in each case, where noncompliance or liability,
individually or in the aggregate, would not reasonably be expected to have
a Material Adverse Effect. The term "Hazardous Material" means any
pollutant, contaminant or waste, or any hazardous, dangerous, or toxic
chemical, material, waste, substance or constituent subject to regulation
under any Environmental Law.
(bb) Immediately after the consummation of the purchase and sale of
the Securities, the fair value and present fair saleable value of the
assets of the Company will exceed the sum of its stated liabilities and
identified contingent liabilities; the Company is not, nor will it be,
after giving effect to the consummation of such transactions, (i) left with
unreasonably small capital with which to carry on its business as it is
proposed to be conducted, (ii) unable to pay its debts
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<PAGE> 23
(contingent or otherwise) as they mature or (iii) otherwise insolvent.
6. INDEMNIFICATION AND CONTRIBUTION.
(a) The Company and the Guarantors agree to jointly and severally
indemnify and hold harmless each Initial Purchaser and each person, if any, who
controls an Initial Purchaser within the meaning of Section 15 of the Act or
Section 20 of the Exchange Act from and against any and all losses, claims,
damages, liabilities and out-of-pocket expenses (including reasonable costs of
investigation) incurred by any such persons arising out of or based upon any
untrue statement or alleged untrue statement of a material fact contained in the
Preliminary Offering Memorandum or Offering Memorandum or in any amendment or
supplement thereto, or arising out of or based upon any omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading, except insofar as such losses,
claims, damages, liabilities or expenses arise out of or are based upon any
untrue statement or omission or alleged untrue statement or omission which has
been made therein or omitted therefrom in reliance upon and in conformity with
the information relating to an Initial Purchaser furnished in writing to the
Company by an Initial Purchaser, through Salomon Brothers Inc, expressly for use
in connection therewith; PROVIDED, HOWEVER, that the indemnification contained
in this paragraph (a) with respect to the Preliminary Offering Memorandum shall
not inure to the benefit of an Initial Purchaser on account of any such loss,
claim, damage, liability or expense arising from the sale of the Securities by
such Initial Purchaser to any person if the untrue statement or alleged untrue
statement or omission or alleged omission of a material fact contained in the
Preliminary Offering Memorandum was corrected in the Offering Memorandum and
such Initial Purchaser sold Securities to that person without sending or giving,
at or prior to the written confirmation of such sale, a copy of the Offering
Memorandum (as then amended or supplemented). The foregoing indemnity agreement
shall be in
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<PAGE> 24
addition to any liability which the Company or a Guarantor may otherwise have.
(b) If any action, suit or proceeding shall be brought against an
Initial Purchaser or any person who controls an Initial Purchaser in respect of
which indemnity may be sought against the Company and the Guarantors in
accordance with this Section 6, such Initial Purchaser or any such person who
controls such Initial Purchaser shall promptly notify in writing the Company,
and the Company and the Guarantors shall assume the defense thereof, including
the employment of counsel reasonably acceptable to such Initial Purchaser or
such person who controls such Initial Purchaser and payment of all fees and
expenses relating to the assumption of the defense by the Company and the
Guarantors. An Initial Purchaser or any person who controls an Initial Purchaser
shall have the right to employ separate counsel in any such action, suit or
proceeding and to participate in the defense thereof, but the fees and expenses
of such counsel shall be at the expense of such Initial Purchaser or any such
person who controls an Initial Purchaser unless (i) the Company has agreed in
writing to pay such fees and expenses, (ii) the Company has failed to assume the
defense and employ counsel on a timely basis or (iii) the named parties to any
such action, suit or proceeding (including any impleaded parties) include both
such Initial Purchaser or any such person who controls an Initial Purchaser and
the Company or a Guarantor and such Initial Purchaser or any such person who
controls an Initial Purchaser shall have been advised by its counsel that
representation of such indemnified party and the Company or a Guarantor by the
same counsel would be inappropriate under applicable standards of professional
conduct (whether or not such representation by the same counsel has been
proposed) due to actual or potential differing interests between them (in which
case the Company shall not have the right to assume the defense of such action,
suit or proceeding (a "Conflicted Action") on behalf of such Initial Purchaser
or any such person who controls an Initial Purchaser). It is understood,
however, that the Company and the Guarantors shall, in connection with any such
Conflicted Action, be liable for the reasonable fees and expenses of a
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<PAGE> 25
single counsel (in addition to any local counsel) for the Initial Purchasers and
each such person who controls an Initial Purchaser, which firm shall be
designated in writing by Salomon Brothers Inc, and that all such reasonable fees
and expenses shall be reimbursed as incurred as provided in paragraph (a)
hereof. The Company and the Guarantors shall not be liable for any settlement of
any such action, suit or proceeding effected without the written consent of the
Company, but if settled with such written consent, or if there be a final
judgment for the plaintiff in any such action, suit or proceeding, the Company
and the Guarantors agree to jointly and severally indemnify and hold harmless
the Initial Purchasers, to the extent provided in paragraph (a), and any person
who controls an Initial Purchaser from and against any loss, claim, damage,
liability or expense by reason of such settlement or judgment.
(c) Each Initial Purchaser, severally and not jointly, agrees to
indemnify and hold harmless the Company, each Guarantor, their respective
directors and officers and any person who controls the Company or a Guarantor
within the meaning of Section 15 of the Act or Section 20 of the Exchange Act to
the same extent as the indemnity from the Company and the Guarantors to the
Initial Purchasers set forth in paragraph (a) hereof, but only with respect to
information relating to such Initial Purchaser furnished in writing by such
Initial Purchaser expressly for use in the Preliminary Offering Memorandum or
Offering Memorandum or any amendment or supplement thereto. If any action, suit
or proceeding shall be brought against the Company or a Guarantor, any of their
respective directors or officers or any such controlling person based on the
Preliminary Offering Memorandum or Offering Memorandum, or any amendment or
supplement thereto, and in respect of which indemnity may be sought against an
Initial Purchaser pursuant to this paragraph (c), such Initial Purchaser shall
have the rights and duties given to the Company and the Guarantors by paragraph
(b) above (except that if the Company or a Guarantor shall have assumed the
defense thereof, such Initial Purchaser shall not be required to do so, but may
employ separate counsel therein and participate in the defense thereof, but the
fees and expenses of such counsel shall be at
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<PAGE> 26
such Initial Purchaser's expense), and the Company, each Guarantor, their
respective directors and officers and any such controlling person shall have the
rights and duties given to the Initial Purchasers by paragraph (b) above. The
foregoing indemnity agreement shall be in addition to any liability which an
Initial Purchaser may otherwise have.
(d) If the indemnification provided for in this Section 6 is
unavailable to an indemnified party under paragraphs (a) or (c) hereof in
respect of any losses, claims, damages, liabilities or expenses referred to
therein, then an indemnifying party, in lieu of indemnifying such indemnified
party, shall contribute to the amount paid or payable by such indemnified party
as a result of such losses, claims, damages, liabilities or expenses (i) in such
proportion as is appropriate to reflect the relative benefits received by the
Company and the Guarantors on the one hand and an Initial Purchaser on the other
hand from the offering of the Securities or (ii) if the allocation provided by
clause (i) above is not permitted by applicable law, in such proportion as is
appropriate to reflect not only the relative benefits referred to in clause (i)
above but also the relative fault of the Company and the Guarantors on the one
hand and an Initial Purchaser on the other in connection with the statements or
omissions that resulted in such losses, claims, damages, liabilities or
expenses, as well as any other relevant equitable considerations. The relative
benefits received by the Company and the Guarantors on the one hand and an
Initial Purchaser on the other shall be deemed to be in the same proportion as
the total net proceeds from the offering (before deducting expenses) received by
the Company bear to the total discounts and commissions received by such Initial
Purchaser, in each case as set forth in the table on the cover page of the
Offering Memorandum. The relative fault of the Company and the Guarantors on the
one hand and an Initial Purchaser on the other hand shall be determined by
reference to, among other things, whether the untrue or alleged untrue statement
of a material fact or the omission or alleged omission to state a material fact
relates to information supplied by the Company or a Guarantor on the one hand or
by such Initial Purchaser on the
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<PAGE> 27
other hand and the parties' relative intent, knowledge, access to information
and opportunity to correct or prevent such statement or omission.
(e) The Company, the Guarantors and the Initial Purchasers agree that
it would not be just and equitable if contribution pursuant to this Section 6
were determined by a pro rata allocation or by any other method of allocation
that does not take account of the equitable considerations referred to in
paragraph (d) above. The amount paid or payable by an indemnified party as a
result of the losses, claims, damages, liabilities and expenses referred to in
paragraph (d) above shall be deemed to include, subject to the limitations set
forth above, any legal or other out-of-pocket expenses reasonably incurred by
such indemnified party in connection with investigating any claim or defending
any such action, suit or proceeding. Notwithstanding the provisions of this
Section 6, no Initial Purchaser shall be required to contribute any amount in
excess of the amount by which the total price of the Securities purchased by it
exceeds the amount of any damages which such Initial Purchaser has otherwise
been required to pay by reason of such untrue or alleged untrue statement or
omission or alleged omission. No person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation.
(f) Any losses, claims, damages, liabilities or expenses for which an
indemnified party is entitled to indemnification or contribution under this
Section 6 shall be paid by the indemnifying party to the indemnified party as
such losses, claims, damages, liabilities or expenses are incurred. The
indemnity and contribution agreements contained in this Section 6 and the
representations and warranties of the Company and the Guarantors set forth in
this Agreement shall remain operative and in full force and effect, regardless
of (i) any investigation made by or on behalf of an Initial Purchaser or any
person who controls an Initial Purchaser, the Company, the Guarantors, their
respective directors or officers or any person controlling the Company or a
Guarantor, (ii) acceptance
-27-
<PAGE> 28
of any Securities and payment therefor hereunder and (iii) any termination of
this Agreement. A successor to an Initial Purchaser or any person who controls
an Initial Purchaser, or to the Company, any of the Guarantors, their respective
directors or officers or any person controlling the Company or a Guarantor,
shall be entitled to the benefits of the indemnity, contribution and
reimbursement agreements contained in this Section 6.
(g) No indemnifying party shall, without the prior written consent of
the indemnified party, effect any settlement of any pending or threatened
action, suit or proceeding in respect of which any indemnified party is or could
have been a party and indemnity could have been sought hereunder by such
indemnified party, unless such settlement includes an unconditional release of
such indemnified party from all liability on claims that are the subject matter
of such action, suit or proceeding.
7. CONDITIONS OF THE INITIAL PURCHASERS' OBLIGATIONS. The
obligations of each Initial Purchaser to purchase and pay for the Securities to
be purchased by it on the Closing Date hereunder are subject to the fulfillment,
in such Initial Purchaser's sole discretion, of the following conditions:
(a) At the time of execution of this Agreement and on the Closing
Date, no order or decree preventing the use of the Offering Memorandum or
any amendment or supplement thereto, or any order asserting that the
transactions contemplated by this Agreement are subject to the registration
requirements of the Act shall have been issued and no proceedings for those
purposes shall have been commenced or shall be pending or, to the knowledge
of the Company, threatened. No order suspending the sale of the Securities
in any jurisdiction shall have been issued and no proceedings for that
purpose shall have been commenced or shall be pending or, to the knowledge
of the Company, threatened.
-28-
<PAGE> 29
(b) On the Closing Date, the Company shall have delivered to the
Initial Purchasers a true, correct and complete copy of the credit
agreement (the "Credit Agreement") dated as of July 7, 1998 by and among
the Company, the Guarantors, the lenders party thereto in their capacities
as lenders thereunder and First Union National Bank, as agent; on and as of
the Closing Date (after giving effect to the consummation of the
transactions contemplated by this Agreement), there shall not exist any
condition which would constitute a Default or an Event of Default (as
defined in the Credit Agreement).
(c) Subsequent to the date hereof, (i) except as disclosed or
contemplated in the Offering Memorandum, there shall not have occurred any
material adverse change in the condition (financial or other), business,
prospects, properties, assets, net worth or results of operations of the
Company and the Subsidiaries, taken as a whole, which, in the opinion of
the Initial Purchasers, would materially adversely affect the market for
the Securities, or (ii) the Offering Memorandum shall not contain any
untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading, if amending or supplementing the Offering Memorandum to correct
any such misstatement or omission could, in the sole judgment of the
Initial Purchasers, materially adversely affect the marketability of the
Securities.
(d) The Initial Purchasers shall have received on the Closing Date an
opinion from each of Edwards & Angell and Wellesley Law Associates, counsel
for the Company, dated the Closing Date and addressed to the Initial
Purchasers, substantially in the form of, respectively, EXHIBIT B-1 and
EXHIBIT B-2 hereto.
(e) The Initial Purchasers shall have received on the Closing Date an
opinion of Cahill Gordon & Reindel,
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<PAGE> 30
counsel for the Initial Purchasers, dated the Closing Date, and addressed
to the Initial Purchasers, with respect to such matters as the Initial
Purchasers may request.
(f) The Initial Purchasers shall have received "cold comfort" letters
addressed to the Initial Purchasers, and dated the date hereof and the
Closing Date, from Arthur Andersen LLP, substantially in the forms
heretofore approved by the Initial Purchasers.
(g) (i) There shall not have been any change in the capital stock of
the Company or any Subsidiary nor any material increase in the short-term
or long-term debt of the Company or any Subsidiary from that set forth or
contemplated in the Offering Memorandum; (ii) except as disclosed or
contemplated by the Offering Memorandum, the Company and the Subsidiaries
shall not have any liabilities or obligations, direct or contingent
(whether or not in the ordinary course of business), that are material to
the Company and the Subsidiaries, taken as a whole; (iii) all the
representations and warranties of the Company contained in this Agreement
shall be true and correct in all material respects on and as of the date
hereof and on and as of the Closing Date as if made on and as of the
Closing Date; and (iv) the Initial Purchasers shall have received a
certificate, dated the Closing Date and signed by the chief executive
officer and the chief accounting officer of each of the Company and the
Guarantors (or such other officers as are acceptable to the Initial
Purchasers), to the effect set forth in this Section 7(g) and in Section
7(h) hereof.
(h) The Company and the Guarantors shall not have failed at or prior
to the Closing Date to have performed or complied with any of their
respective agreements herein contained and required to be performed or
complied with by them hereunder at or prior to the Closing Date.
(i) There shall not have been any announcement by any "nationally
recognized statistical rating
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<PAGE> 31
organization," as defined for purposes of Rule 436(g) under the Act, that
(i) it is downgrading its rating assigned to any class of securities of the
Company (including the Securities), or (ii) it is reviewing its ratings
assigned to any class of securities of the Company (including the
Securities) with a view to possible downgrading, with negative implications
or direction not determined.
(j) The Securities shall have been approved for trading on PORTAL.
(k) The Company shall have taken all necessary acts to (i) repay all
of the indebtedness for money borrowed of the Company and the Subsidiaries
indicated as being repaid in the Offering Memorandum under the caption
"Selected Pro Forma Financial Data" immediately prior to the issuance of
the Securities and (ii) terminate the related credit agreements.
(l) The Company shall have received a solvency opinion from Houlihan,
Lokey, Howard & Zukin Financial Advisors, Inc., which solvency opinion
shall be in form and substance reasonably satisfactory to the Initial
Purchasers.
(m) The Company and the Guarantors shall have furnished or caused to
be furnished to the Initial Purchasers such further certificates and
customary closing documents as the Initial Purchasers shall have reasonably
requested.
All such opinions, certificates, letters and other documents will be
in compliance with the provisions hereof only if they are reasonably
satisfactory in form and substance to the Initial Purchasers.
Any certificate or document signed by any officer of the Company or a
Guarantor and delivered to the Initial Purchasers, or to counsel for the Initial
Purchasers, shall be deemed a representation and warranty by the Company or such
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<PAGE> 32
Guarantor to the Initial Purchasers as to the statements made therein.
8. EXPENSES.
(a) Whether or not the purchase and sale of the Securities hereunder
is consummated or this Agreement is terminated pursuant to Section 9 hereof, the
Company agrees to pay the following costs and expenses and all other costs and
expenses incident to the performance by it of its obligations hereunder: (i) the
printing or reproduction of the Preliminary Offering Memorandum and the Offering
Memorandum (including financial statements thereto), and each amendment or
supplement to any of them, this Agreement, the Registration Rights Agreement and
the Indenture; (ii) the delivery (including postage, air freight charges and
charges for counting and packaging) of such copies of the Offering Memorandum,
the Preliminary Offering Memorandum and all amendments or supplements thereto as
may be reasonably requested for use in connection with the offering and sale of
the Securities; (iii) the printing, authentication, issuance and delivery of
certificates for the Securities, including any stamp taxes in connection with
the original issuance and sale of the Securities; (iv) the printing (or
reproduction) and delivery of the preliminary and supplemental Blue Sky
Memoranda and all other agreements and documents printed (or reproduced) and
delivered in connection with the offering of the Securities; (v) the application
for quotation of the Securities on PORTAL; (vi) the qualification of the
Securities for offer and sale under the securities or Blue Sky laws of the
several states as provided in Section 4(f) hereof (including the reasonable
fees, expenses and disbursements of counsel for the Initial Purchasers not in
excess of $5,000 (relating to the preparation, printing or reproduction, and
delivery of the preliminary and supplemental Blue Sky Memoranda and such
qualification); and (vii) the fees and expenses of the Company's accountants and
the fees and expenses of counsel (including local and special counsel) for the
Company.
(b) If the purchase and sale of the Securities hereunder is not
consummated because any condition to the
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<PAGE> 33
obligations of the Initial Purchasers set forth in Section 7 hereof is not
satisfied, because this Agreement is terminated because of any failure, refusal
or inability on the part of the Company and the Guarantors to perform all
obligations and satisfy all conditions on their part to be performed or
satisfied hereunder other than by reason of a default by any Initial Purchaser
in payment for the Securities on the Closing Date, the Company shall reimburse
the Initial Purchasers promptly upon demand for all reasonable out-of-pocket
expenses (including reasonable fees and disbursements of counsel) that shall
have been incurred by it in connection with the proposed purchase and sale of
the Securities and the other transactions contemplated hereby; PROVIDED that any
defaulting Initial Purchaser shall reimburse the Company upon demand for all
reasonable out-of-pocket expenses (including reasonable fees and expenses for
law and accounting services and printing costs) that shall have been incurred by
it in connection with the proposed purchase and sale of the Securities and the
transactions contemplated hereby.
9. TERMINATION OF AGREEMENT. (a) This Agreement shall be subject
to termination in the absolute discretion of the Initial Purchasers, without
liability on the part of the Initial Purchasers to the Company and the
Guarantors, by notice to the Company, if prior to the Closing Date, (i) trading
in securities generally on the New York Stock Exchange, American Stock Exchange
or the Nasdaq National Market shall have been suspended or materially limited,
(ii) a general moratorium on commercial banking activities in New York shall
have been declared by either Federal or New York state authorities or (iii)
there shall have occurred any outbreak or escalation of hostilities or other
international or domestic calamity, crisis or change in political, financial or
economic conditions, the effect of which on the financial markets of the United
States or the market for the Securities is such as to make it, in the sole
judgment of the Initial Purchasers, impracticable or inadvisable to commence or
continue the offering of the Securities on the terms set forth on the cover page
of the Offering Memorandum or to enforce contracts for the resale of the
Securities by the Initial Purchasers. Notice of such
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<PAGE> 34
termination may be given to the Company by telegram, telecopy or telephone and
shall be subsequently confirmed by letter.
(b) If any Initial Purchaser shall fail to purchase and pay for any
of the Securities agreed to be purchased by such Initial Purchaser hereunder and
such failure to purchase shall constitute a default in the performance of its
obligations under this Agreement, the remaining Initial Purchaser or Initial
Purchasers, as the case may be, shall be obligated to take up and pay for the
Securities which the defaulting Initial Purchaser agreed but failed to purchase;
PROVIDED, HOWEVER, that in the event that the aggregate principal amount of
Securities which the defaulting Initial Purchaser agreed but failed to purchase
shall exceed 10% of the aggregate principal amount of Securities set forth in
Schedule I hereto, the remaining Initial Purchaser shall have the right to
purchase all, but shall not be under any obligation to purchase any, of the
Securities, and if such non-defaulting Initial Purchaser does not purchase all
the Securities, this Agreement will terminate without liability to the
non-defaulting Initial Purchaser or the Company and the Guarantors. In the event
of a default by any Initial Purchaser as set forth in this Section 9(b), the
Closing Date shall be postponed for such period, not exceeding seven days, as
the non-defaulting Initial Purchaser shall determine in order that the required
changes in the Offering Memorandum or in any other documents or arrangements may
be effected. Nothing contained in this Agreement shall relieve any defaulting
Initial Purchaser of its liability, if any, to the Company and the Guarantors or
the non-defaulting Initial Purchaser for damages occasioned by its default
hereunder.
10. INFORMATION FURNISHED BY THE INITIAL PURCHASERS. The statements
set forth in the stabilization legend on the inside front cover, the last
paragraph on the cover page and in the third paragraph under the caption "Plan
of Distribution" in the Preliminary Offering Memorandum and Offering Memorandum,
constitute the only information furnished by the Initial Purchasers as such
information is referred to in Sections 5(b) and 6 hereof.
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<PAGE> 35
11. MISCELLANEOUS. Except as otherwise provided herein, notice given
pursuant to any provision of this Agreement shall be in writing and shall be
delivered (i) if to the Company and the Guarantors, at Simonds Industries Inc.,
135 Intervale Road, Fitchburg, MA 01420, Attention: Chief Financial Officer, or
(ii) if to the Initial Purchasers, to Salomon Brothers Inc, Seven World Trade
Center, New York, NY 10048, Attention: Manager, Investment Banking Division.
This Agreement has been and is made solely for the benefit of the
Initial Purchasers, the Company and the Guarantors, and their respective
directors, officers and the controlling persons referred to in Section 6 hereof
and their respective successors and assigns, to the extent provided herein, and
no other person shall acquire or have any right under or by virtue of this
Agreement. Neither the term "successor" nor the terms "successors and assigns"
as used in this Agreement shall include a purchaser from an Initial Purchaser of
any of the Securities in its status as such purchaser.
12. APPLICABLE LAW; COUNTERPARTS. This Agreement shall be governed by
and construed in accordance with the laws of the State of New York applicable to
contracts made and to be performed within the State of New York.
This Agreement may be signed in various counterparts which together
constitute one and the same instrument.
-35-
<PAGE> 36
Please confirm that the foregoing correctly sets forth the agreement
among the Company, the Guarantors and the Initial Purchasers.
Very truly yours,
THE COMPANY:
SIMONDS INDUSTRIES INC.
By: ____________________________
Name:
Title:
THE GUARANTORS:
ARMSTRONG MANUFACTURING COMPANY
By: ____________________________
Name:
Title:
SIMONDS INDUSTRIES FSC, INC.
By: ____________________________
Name:
Title:
SIMONDS HOLDING COMPANY, INC.
By: ____________________________
Name:
Title:
<PAGE> 37
Confirmed as of the date first above mentioned.
SALOMON BROTHERS INC
FIRST UNION CAPITAL MARKETS,
a division of Wheat First
Securities, Inc.
SCHRODER & CO. INC.
By: SALOMON BROTHERS INC
By: _____________________________
Name:
Title:
- 2 -
<PAGE> 38
SCHEDULE I
Principal Amount
of Notes
Initial Purchasers to be Purchased
- ------------------ ---------------
Salomon Brothers Inc...................................... $ 50,000,000
First Union Capital Markets............................... 30,000,000
Schroder & Co. Inc........................................ 20,000,000
------------
$100,000,000
============
<PAGE> 39
SCHEDULE II
SUBSIDIARIES
<TABLE>
<CAPTION>
OWNED BY AND JURISDICTION OF
NAME PERCENTAGE OWNED INCORPORATION
- ---- ---------------- -------------
<S> <C> <C>
Simonds Holding Company, Inc. Simonds Industries Inc.........100.00% Delaware
Simonds Industries FSC, Inc. Simonds Industries Inc.........100.00% US Virgin Islands
Simonds Industries Limited Simonds Holding Company, Inc...100.00% United Kingdom
Simonds Industries Inc. Simonds Holding Company, Inc...100.00% Ontario, Canada
Kowin-Simonds, Inc. Kowin Development Corporation...25.00% Delaware
Croft Investments Ltd...........25.00%
Simonds Industries Inc..........50.00%
Wespa Metallsagen-fabrik Simonds Holding Company, Inc....71.43% Germany
Simonds Industries GmbH Simonds Canada Inc..............28.57%
Strongbridge Limited Simonds Industries Inc.........100.00% Ontario, Canada
Armstrong Manufacturing Company Simonds Holding Company, Inc...100.00% Oregon
</TABLE>
<PAGE> 40
<TABLE>
<CAPTION>
<S> <C> <C>
Notting UK Limited Simonds Industries Inc.........100.00% United Kingdom
Notting Canada, Inc. Simonds Industries Inc.........100.00% Ontario, Canada
Notting America, Inc. Notting Canada, Inc............100.00% New York
Servitroquel S.A. Simonds Industries Inc..........99.99% Spain
Notting Canada, Inc..............0.01%
Notting de Mexico S.A. Notting Canada, Inc.............26.00% Mexico
(this subsidiary is inactive,
without employees, assets,
liabilities or operations)
ComputerCarton Limited Simonds Industries Inc.........100.00% United Kingdom
</TABLE>
- 2 -
<PAGE> 41
EXHIBIT B-1 TO
PURCHASE AGREEMENT
FORM OF OPINION
[LETTERHEAD OF EDWARDS & ANGELL]
1. No qualification of the Indenture under the 1939 Act is required
in connection with the offer and sale of the Securities as contemplated by the
Purchase Agreement.
2. Assuming (i) the representations and warranties of the Company in
Section 5 of the Purchase Agreement are true and correct, (ii) the
representations and warranties of the Initial Purchasers in Section 2 of the
Purchase Agreement are true and correct, (iii) the Company complies with the
covenants set forth in Section 4 of the Purchase Agreement, (iv) the Initial
Purchasers comply with the covenants set forth in Section 2 of the Purchase
Agreement, (v) the Initial Purchasers comply with the offering and transfer
procedures and restrictions described in the Offering Memorandum, (vi) the
representations and warranties deemed to be made in the Offering Memorandum by
purchasers to whom the Initial Purchasers initially resell Securities are true
and correct, and (vii) purchasers to whom the Initial Purchasers initially
resell Securities receive a copy of the Offering Memorandum prior to such sale,
the purchase and sale of the Securities pursuant to the Purchase Agreement
(including the Initial Purchasers' offering and sale of the Securities on the
terms and in the manner set forth in the Offering Memorandum and Section 2 of
the Purchase Agreement) do not require registration under the Act.
3. The Indenture, the Securities, the Registration Rights Agreement
and the Guarantees conform in all material
<PAGE> 42
respects to the descriptions thereof contained in the Offering Memorandum.
4. The Company is not, nor immediately after the sale of the
Securities to be sold under the Purchase Agreement and the application of the
proceeds from such sale (as described in the Offering Memorandum under the
caption "Use of Proceeds") will it be an "investment company" as such term is
defined in the Investment Company Act of 1940, as amended.
5. Neither the consummation of the transactions contemplated by the
Purchase Agreement nor the sale, issuance, execution or delivery of the
Securities will violate Regulation G, T, U or X of the Board of Governors of the
Federal Reserve system.
We have participated in conferences with officers and other
representatives of the Company, representatives of the independent public
accountants for the Company, representatives of the Initial Purchasers and
counsel for the Initial Purchasers at which conferences the contents of the
Offering Memorandum and related matters were discussed, and, although we have
not independently verified and are not passing upon and assume no responsibility
for the accuracy, completeness or fairness of the statements contained in the
Offering Memorandum (except to the extent specified in paragraph 3), and that
our judgment as to materiality is, to the extent we deem proper, based in part
upon the views of appropriate officers and other representatives of the Company,
nothing has come to our attention that leads us to believe that the Offering
Memorandum, as of its date or as of the date hereof, contained or contains an
untrue statement of a material fact or omitted to state a material fact required
to be stated therein or necessary to make the statements contained therein, in
light of the circumstances under which they were made, not misleading (it being
understood that we express no opinion with respect to the financial statements
and related notes thereto and the other financial, statistical and accounting
data included in the Offering Memorandum).
- 2 -
<PAGE> 43
EXHIBIT B-2 TO
PURCHASE AGREEMENT
FORM OF OPINION
[LETTERHEAD OF WELLESLEY LAW ASSOCIATES]
1. The Company has the requisite corporate power and authority to
execute, deliver and perform its obligations under the Indenture; the execution
and delivery of, and the performance by the Company of its obligations under the
Indenture have been duly and validly authorized by the Company; and the
Indenture has been duly executed and delivered by the Company and, assuming due
authorization, execution and delivery by the Trustee, constitutes the valid and
legally binding agreement of the Company, enforceable against the Company in
accordance with its terms, except as enforcement thereof may be limited by
bankruptcy, insolvency or other similar laws affecting the enforcement of
creditors' rights generally and subject to the applicability of general
principles of equity.
2. Each of the Guarantors has the requisite corporate or partnership
power and authority to execute, deliver and perform its obligations under the
Indenture; the execution and delivery of, and the performance by each of the
Guarantors of its obligations under, the Indenture have been duly and validly
authorized by each Guarantor; and the Indenture has been duly executed and
delivered by each Guarantor and, assuming due authorization, execution and
delivery by the Trustee, the Indenture constitutes the valid and binding
agreement of each Guarantor, enforceable against each Guarantor in accordance
with its terms, except as enforcement thereof may be limited by bankruptcy,
insolvency, or other similar laws affecting the enforcement of creditors' rights
generally and subject to the applicability of general principles of equity.
<PAGE> 44
3. The Notes have been duly authorized by the Company and, when
authenticated by the Trustee in accordance with the Indenture and delivered to
the Initial Purchasers against payment therefor in accordance with the terms of
the Purchase Agreement, will have been validly issued and delivered, and will
constitute valid and binding obligations of the Company entitled to the benefits
of the Indenture and enforceable in accordance with their terms, except as
enforcement thereof may be limited by bankruptcy, insolvency or other similar
laws affecting the enforcement of creditors' rights generally and subject to the
applicability of general principles of equity.
4. The Guarantees have been duly authorized by each Guarantor and,
when delivered to the Initial Purchasers against payment therefor in accordance
with the terms of the Purchase Agreement, will have been validly delivered, and
each Guarantee will constitute a valid and binding obligation of each Guarantor
entitled to the benefits of the Indenture and enforceable in accordance with
their terms, except as enforcement thereof may be limited by bankruptcy,
insolvency or other similar laws affecting the enforcement of creditors' rights
generally and subject to the applicability of general principles of equity.
5. All the outstanding shares of capital stock of the Company have
been duly authorized and validly issued, are fully paid and nonassessable and
are free of any preemptive or similar rights. All of the outstanding interests
in the Guarantors have been validly issued, are fully paid and nonassessable.
6. Each of the Company and the Guarantors is validly existing and in
good standing under the laws of its jurisdiction of incorporation or
organization with requisite power and authority to own, lease and operate its
properties and to conduct its business as described in the Offering Memorandum,
and is duly registered and qualified to conduct its business and is in good
standing in each jurisdiction where the nature of its properties or the conduct
of its business requires such registration or qualification, except where the
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<PAGE> 45
failure so to register or qualify could not reasonably be expected to have a
Material Adverse Effect.
7. To our knowledge, (i) none of the Company or the Subsidiaries is
in violation of its certificates or articles of incorporation or by-laws or
other organizational documents, or of any law, ordinance, administrative or
governmental rule or regulation known to us to be applicable to it or of any
decree of any court or governmental agency or body known to us as having
jurisdiction over the Company or any Subsidiary, except where any such violation
or violations in the aggregate could not reasonably be expected to have a
Material Adverse Effect and (ii) none of the Company or any Subsidiary is in
default in the performance of any obligation, agreement or condition contained
in any bond, debenture, note or any other evidence of indebtedness or in any
agreement, indenture, lease or other instrument known to us to which the Company
or any Subsidiary is a party or by which any of them or any of their respective
properties may be bound, except as disclosed in the Offering Memorandum or where
any such default or defaults in the aggregate could not reasonably be expected
to have a Material Adverse Effect.
8. To our knowledge none of (x) the issuance, offer, sale or delivery
of the Securities, (y) the execution, delivery or performance of the Transaction
Documents by the Company or any Subsidiary, to the extent a party thereto, or
(z) the consummation by the Company or any Subsidiary of any of the transactions
contemplated by the Transaction Documents, (i) requires any consent, approval,
authorization or other order of, or registration or filing with, any court,
regulatory body, administrative agency or other governmental body, agency or
official (except such as may have been obtained or may be required in connection
with the registration under the Act of the Securities in accordance with the
Registration Rights Agreement, the qualification of the Indenture under the 1939
Act and except for compliance with the securities or Blue Sky laws of various
jurisdictions), (ii) conflicts or will conflict with or constitutes or will
constitute a breach of, or a default under, the certificate or articles of
incorporation or by-laws, or other organizational documents, of the Company or
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<PAGE> 46
any Subsidiary, except any such conflicts, breaches and defaults that in the
aggregate could not reasonably be expected to have a Material Adverse Effect,
(iii) conflicts or will conflict with or constitutes or will constitute a breach
of, or a default under, any agreement, indenture, lease or other instrument
known to us to which the Company or any Subsidiary is a party or by which any of
them or any of their respective properties may be bound, except as disclosed in
the Offering Memorandum or any such conflicts, breaches and defaults that in the
aggregate could not reasonably be expected to have a Material Adverse Effect,
(iv) violates or will violate any statute, law, regulation or filing or
judgment, injunction, order or decree known to us to be applicable to the
Company or any Subsidiary or any of their respective properties, except any such
violations that in the aggregate could not reasonably be expected to have a
Material Adverse Effect, or (v) will result in the creation or imposition of any
lien, charge or encumbrance upon any property or assets of the Company or any
Subsidiary pursuant to the terms of any agreement or instrument to which any of
them is a party or by which any of them may be bound or to which any of their
property or assets is subject, other than as disclosed in the Offering
Memorandum.
9. The Company has the requisite corporate power and authority to
execute, deliver and perform its obligations under the Purchase Agreement and
the Registration Rights Agreement; the execution and delivery of, and the
performance by the Company of its obligations under, the Purchase Agreement and
the Registration Rights Agreement have been duly and validly authorized by the
Company, and each of the Purchase Agreement and the Registration Rights
Agreement has been duly executed and delivered by the Company. The Registration
Rights Agreement constitutes the valid and legally binding agreement of the
Company, enforceable against the Company in accordance with its terms, except as
the enforcement thereof may be limited by bankruptcy, insolvency or other
similar laws affecting the enforcement of creditors' rights generally and
subject to the applicability of general principles of equity, and except as
rights to indemnity and contribution thereunder
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<PAGE> 47
may be limited by Federal or state securities laws or principles of public
policy.
10. Each Guarantor has the requisite power and authority to execute,
deliver and perform its obligations under the Purchase Agreement and the
Registration Rights Agreement; the execution and delivery of, and the
performance by each Guarantor of its obligations under, the Purchase Agreement
and the Registration Rights Agreement has been duly executed and delivered by
each Guarantor. The Registration Rights Agreement constitutes the valid and
legally binding agreement of each Guarantor, enforceable against each Guarantor
in accordance with its terms, except as the enforcement thereof may be limited
by creditors' rights generally and subject to the applicability of general
principles of equity, and except as rights to indemnity and contribution
thereunder may be limited by Federal or state securities laws or principles of
public policy.
11. To our knowledge, there are no legal governmental proceedings
involving or affecting the Company or any Subsidiary or any of their respective
properties or assets which would be required to be described in a prospectus
pursuant to the Act that are not described in the Offering Memorandum, nor are
there any material contracts or other documents which would be required to be
described in a prospectus pursuant to the Act that are not described in the
Offering Memorandum.
We have participated in conferences with officers and other
representatives of the Company, representatives of the independent public
accountants for the Company, representatives of the Initial Purchasers and
counsel for the Initial Purchasers at which conferences the contents of the
Offering Memorandum and related matters were discussed, and, although we have
not independently verified and are not passing upon and assume no responsibility
for the accuracy, completeness or fairness of the statements contained in the
Offering Memorandum, and that our judgment as to materiality is, to the extent
we deem proper, based in part upon the views of appropriate officers and other
representatives of the Company,
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<PAGE> 48
nothing has come to our attention that leads us to believe that the Offering
Memorandum, as of its date or as of the date hereof, contained or contains an
untrue statement of a material fact or omitted to state a material fact required
to be stated therein or necessary to make the statements contained therein, in
light of the circumstances under which they were made, not misleading (it being
understood that we express no opinion with respect to the financial statements
and related notes thereto and the other financial, statistical and accounting
data included in the Offering Memorandum).
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<PAGE> 1
EXHIBIT 5.1
September 3, 1998
Simonds Industries, Inc.
135 Intervale Road
Fitchburg, MA 01420
Ladies and Gentlemen:
We have acted as counsel to Simonds Industries, Inc., a Delaware corporation
(the "Company"), and to its subsidiaries, Armstrong Manufacturing Company,
Simonds Holding Company, Inc., and Simonds Industries FSC, Inc. (collectively,
the "Guarantors") in connection with a Registration Statement on Form S-4 (the
"Registration Statement") to be filed by the Company and the Guarantors with the
Securities and Exchange Commission relating to (i) the proposed issuance by the
Company of up to $100,000,000 aggregate principal amount of its new 10-1/4%
Senior Subordinated Notes due 2008 registered under the Securities Act of 1933,
as amended (the "Exchange Notes"), in exchange for a like principal amount of
the Company's outstanding 10-1/4% Senior Subordinated Notes due 2008, which have
not been so registered (the "Original Notes") (the "Exchange Offer"), and (ii)
the guarantees of the Exchange Notes by the Guarantors (the "Guarantees"). The
Exchange Notes will be issued under an Indenture dated as of July 7, 1998 (the
"Indenture") among the Company, the Guarantors and State Street Bank and Trust
Company, as trustee.
We have examined and relied upon the information set forth in the Registration
Statement and such other documents and records as we have deemed necessary. In
addition, as to questions of fact material to our opinion, we have relied upon
certificates of officers of the Company and the Guarantors and public officials.
In the course of our examination, we have assumed the legal capacity of all
natural persons, the genuineness of all signatures, the authenticity of all
documents submitted to us as originals, the conformity to original documents of
all documents submitted to us as certified or photostatic copies and the
authenticity of the originals of such latter documents. In making our
examination of documents executed by parties other than the Company and the
Guarantors, we have assumed that such parties had the power to enter into and
perform all obligations thereunder and have also assumed the due authorization
by all requisite action, and execution and delivery by such parties of such
documents and the validity and binding effect thereof on such parties.
We express no opinion as to the laws of any jurisdiction other than those of The
Commonwealth of Massachusetts, the General Corporation Law of the State of
Delaware and the federal laws of the United States of America. We call your
attention to the fact that each of the Indenture, the Exchange Notes and the
Guarantees provides that it is to be governed by the internal laws of the State
of New York. We are of the opinion that a Massachusetts court or a federal court
sitting in Massachusetts would, under conflict of
<PAGE> 2
law principles observed by the courts of Massachusetts, give effect to such
provisions. For purposes of the opinion provided herein, we have assumed with
your permission that the Indenture, the Exchange Notes and the Guarantees
provide that they are to be governed by and construed in accordance with the
domestic substantive laws of The Commonwealth of Massachusetts.
Based upon the foregoing, we are of the opinion that the Exchange Notes and the
Guarantees have been duly authorized by all requisite corporate action of the
Company and the Guarantors, as the case may be, and, when executed and
authenticated in the manner provided for in the Indenture and delivered against
surrender and cancellation of a like aggregate principal amount of Original
Notes as contemplated in the Registration Rights Agreement, dated July 7, 1998,
among the Company, the Guarantors and the Initial Purchasers named therein, the
Exchange Notes will constitute valid and binding obligations of the Company and
the Guarantors, as the case may be, entitled to the benefits of the Indenture
and enforceable against the Company and the Guarantors, as the case may be, in
accordance with their terms, except as enforcement thereof may be limited by
bankruptcy, insolvency, reorganization, moratorium or other laws relating to or
affecting creditors' rights generally or by general equitable principles
(regardless of whether considered in a proceeding in equity or at law).
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to our firm under the caption "Legal
Matters" contained in the Prospectus included therein.
Very truly yours,
/s/ Wellesley Law Associates
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<PAGE> 1
EXHIBIT 5.2
September 3, 1998
Simonds Industries, Inc.
135 Intervale Road
Fitchburg, MA 01420
Ladies and Gentlemen:
We have acted as counsel to Simonds Industries, Inc., a Delaware corporation
(the "Company"), and to its subsidiaries, Armstrong Manufacturing Company,
Simonds Holding Company, Inc., and Simonds Industries FSC, Inc. (collectively,
the "Guarantors") in connection with a Registration Statement on Form S-4 (the
"Registration Statement") to be filed by the Company and the Guarantors with the
Securities and Exchange Commission relating to (i) the proposed issuance by the
Company of up to $100,000,000 aggregate principal amount of its new 10-1/4%
Senior Subordinated Notes due 2008 registered under the Securities Act of 1933,
as amended (the "Exchange Notes"), in exchange for a like principal amount of
the Company's outstanding 10-1/4% Senior Subordinated Notes due 2008, which have
not been so registered (the "Original Notes") (the "Exchange Offer"), and (ii)
the guarantees of the Exchange Notes by the Guarantors (the "Guarantees"). The
Exchange Notes will be issued under an Indenture dated as of July 7, 1998 (the
"Indenture") among the Company, the Guarantors and State Street Bank and Trust
Company, as trustee.
We have examined and relied upon the information set forth in the Registration
Statement and such other documents and records as we have deemed necessary. In
addition, as to questions of fact material to our opinion, we have relied upon
certificates of officers of the Company and the Guarantors and public officials.
In the course of our examination, we have assumed the legal capacity of all
natural persons, the genuineness of all signatures, the authenticity of all
documents submitted to us as originals, the conformity to original documents of
all documents submitted to us as certified or photostatic copies and the
authenticity of the originals of such latter documents. In making our
examination of documents executed by parties other than the Company and the
Guarantors, we have assumed that such parties had the power to enter into and
perform all obligations thereunder and have also assumed the due authorization
by all requisite action, and execution and delivery by such parties of such
documents and the validity and binding effect thereof on such parties.
Based upon the foregoing, we are of the opinion that the Exchange Notes and the
Guarantees have been duly authorized by all requisite corporate action of the
Company and the Guarantors, as the case may be, and, when executed and
authenticated in the manner provided for in the Indenture and delivered against
surrender and cancellation of a like aggregate principal amount of Original
Notes as contemplated in the Registration
<PAGE> 2
Rights Agreement, dated July 7, 1998, among the Company, the Guarantors and the
Initial Purchasers named therein, the Exchange Notes will constitute valid and
binding obligations of the Company and the Guarantors, as the case may be,
entitled to the benefits of the Indenture and enforceable against the Company
and the Guarantors, as the case may be, in accordance with their terms, except
as enforcement thereof may be limited by bankruptcy, insolvency, reorganization,
moratorium or other laws relating to or affecting creditors' rights generally or
by general equitable principles (regardless of whether considered in a
proceeding in equity or at law).
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to our firm under the caption "Legal
Matters" contained in the Prospectus included therein.
Very truly yours,
/s/ Edwards & Angell, LLP
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<PAGE> 1
EXHIBIT 10.1
EMPLOYMENT AND NON-COMPETITION AGREEMENT
EMPLOYMENT AND NON-COMPETITION AGREEMENT, dated as of May 26, 1995, by
and between SIMONDS INDUSTRIES, INC., a Delaware corporation (the "Company"),
and Ross B. George of Fitchburg, Massachusetts ("Employee").
W I T N E S S E T H:
WHEREAS, the Company, SI Holding Corporation ("Holding"), the Company's
common stockholders (the "Stockholders") (including Employee), and certain other
parties, have entered into that certain Stock Purchase Agreement dated as of May
26, 1995 (the "Stock Purchase Agreement") pursuant to which Holding has agreed
to purchase from the Stockholders all of the outstanding common stock of the
Company; and
WHEREAS, the closing of the transactions under the Stock Purchase
Agreement is taking place on the date hereof; and
WHEREAS, the parties hereto acknowledge that Holding is making its
investment in the Company in part in reliance upon the Employee's expertise and
knowledge in the industries in which the Company shall conduct its business; and
WHEREAS, Employee has agreed to enter into this Agreement in order to
assure company of Employee's continued expertise and involvement in the conduct
of the Company's business, subject to the terms and conditions as hereinafter
provided; and
WHEREAS, the Company desires to employ Employee as Chief Executive
Officer of the Company and Employee desires to be employed by the Company in
such capacity, upon the terms and conditions set forth in this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
herein contained, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
1.01 CAUSE. Cause shall mean (a) an act of fraud, embezzlement,
misappropriation or breach of fiduciary duty against the Company by Employee as
determined by the Company's Board of Directors in its reasonable discretion, (b)
any intentional, knowing or reckless action or inaction by Employee which causes
the breach of a representation, warranty or covenant by the Company or any
Management Stockholder under any of the Related Agreements (as such terms are
defined in the Stockholder Agreement), (c) conviction of Employee by a court of
competent jurisdiction of or a plea of guilty or nolo contendere by Employee to
any felony or crime involving moral turpitude, (d) the habitual drug addiction
or intoxication of Employee, (e) the willful failure or refusal of Employee to
perform his duties under the terms of his employment with the Company, including
the willful failure or refusal of Employee to follow the instructions
<PAGE> 2
of the Company's Board of Directors, (f) the breach by Employee of any terms of
this Agreement (including, without limitation, the breach of any
non-competition, non-disclosure, or other restrictive covenants), or (g) the
breach by Employee of any of the covenants, terms, and provisions of Sections
3.1, 5 and 7 of the Stockholder Agreement.
1.02 CONTRACT TERM. "Contract Term" shall mean the period commencing on
the Effective Date and expiring five (5) years after the Effective Date.
1.03 DIRECTORS. "Directors" shall mean the Board of Directors of the
Company.
1.04 DISABILITY. Employee shall be deemed to have a disability if an
independent medical doctor (selected by the Company's health or disability
insurer) certifies that such Employee has for six (6) months, consecutive or
non-consecutive, in any twelve (12) month period been disabled in such a manner
that he is unable to perform the essential functions of his then current
position. Any refusal by Employee to submit to a medical examination for the
purpose of certifying disability shall be deemed to constitute conclusive
evidence of such Employee's disability.
1.05. EFFECTIVE DATE. "Effective Date" shall mean the date of this
Agreement.
1.06 STOCKHOLDER AGREEMENT. "Stockholder Agreement" means that certain
stockholder agreement by and among the common shareholders of Holding dated as
of May 26, 1995.
ARTICLE II
EMPLOYMENT AND SERVICES
2.01 CAPACITY AND SERVICES. The Company hereby employs Employee to
serve in the capacity of Chief Executive Officer of the Company, and Employee
hereby accepts such employment, upon the terms and conditions set forth in this
Agreement. During the period the Employee is employed by the Company, Employee
shall devote substantially all of his attention and energies on a full-time
basis to the business and affairs of the Company and use his best efforts to
promote its interests; provided, however, that Employee may devote reasonable
periods of time for personal purposes, trade associations and charitable
activities consistent with past practices so long as such purposes or activities
do not (i) cause or result in a breach of Article III hereof or (ii) adversely
affect the interests of the Company or materially detract from or interfere with
the performance of the services otherwise required to be performed by Employee
as set forth herein. While the Employee is employed by the Company, Employee
shall neither accept nor hold any other employment without approval of the
Directors. In his capacity as Chief Executive Officer of the Company, Employee
shall be responsible for the supervision and control over, and responsibility
for, the financial affairs and operations of the Company, and shall have such
other powers and duties as determined by the Directors from time to time. Such
services to be provided by Employee hereunder shall be provided for the benefit
of the Company without regard to whether any of the Company's operations are
conducted directly by the Company, through Holding, or through any subsidiaries,
joint ventures or unincorporated division of the Company. While the Employee is
employed by the Company, the Company shall provide
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<PAGE> 3
Employee with an office and support staff reasonably necessary for the proper
performance of his duties hereunder and consistent with the past practices of
the Company.
2.02 LIMITATION ON AUTHORITY OF EMPLOYEE. The authority of Employee as
Chief Executive Officer of the Company shall have such limitations as shall be
prescribed by the Directors.
2.03 BASE SALARY. The Company shall pay Employee a salary, determined
on an annual basis by the Directors, for the services rendered by Employee to
the Company while the Employee is employed by the Company (the "Base Salary").
Employee's Base Salary shall in no event be less than his annual salary in
effect on May 26, 1995, as adjusted by any increases during the term of this
Agreement, and shall be amortized for payment upon such dates as Company
customarily pays its employees.
2.04 BONUS. While the Employee is employed by the Company, Employee
shall be entitled to participate in any bonus plan approved by the Directors.
2.05 FRINGE BENEFITS. While the Employee is employed by the Company,
Employee shall be entitled to such employee fringe benefits as are set forth in
the Company's Standard Executive Benefits Program, with present provisions as
set forth generally in Exhibit A attached hereto. Additionally, Employee shall
be entitled to a Company vehicle approved by the Directors as to make and model.
If Employee recognizes additional taxable income as a result of use of a Company
vehicle, Company shall pay Employee such additional amount as shall be necessary
to cover such additional tax on a grossed up basis. Employee's participation in
any benefit program shall be at the same level of employee/employer contribution
as has been set for all participants in such plan.
2.06 BUSINESS EXPENSES. While the Employee is employed by the Company,
the Company will reimburse Employee for all reasonable travel and out-of-pocket
expenses actually incurred by him, consistent with past practices of the
Company, or as otherwise directed by the Directors for the purpose of and in
connection with performing his services to the Company hereunder. Such
reimbursement shall be made upon presentation by Employee to the Company of
vouchers or other statements itemizing such expenses in reasonable detail.
2.07 DEATH OR DISABILITY. In the event of the death or Disability of
Employee while the Employee is employed by the Company, the Company shall have
no further obligations or liability to Employee hereunder, except to pay to
Employee or Employee's estate (i) the amount of Employee's Base Salary in effect
as of the date of death or Disability earned but unpaid to the date of
Employee's death or Disability (including Base Salary for a period of ninety
(90) days between date of Disability and the commencement of disability
insurance benefits under the Company's policy), plus (ii) any unpaid bonus
declared or to be declared by the Directors for prior periods and for the period
in which his death or Disability shall occur (prorated to the date of such death
or Disability), plus (iii) any unreimbursed business expenses incurred by
Employee prior to his death or Disability and presented for payment pursuant to
Section 2.06 hereof.
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<PAGE> 4
2.08 VOLUNTARY TERMINATION BY EMPLOYEE OR TERMINATION FOR CAUSE. In the
event the Employee voluntarily terminates his employment with the Company or the
Employee's employment with the Company is terminated for Cause, the Company
shall have no further obligations or liability to Employee hereunder, except to
pay to Employee (in addition to and without regard for benefits, if any, due or
to become due under any insurance, retirement or other similar plan of the
Company or any other person or entity) (i) the amount of Employee's Base Salary
in effect as of the date of termination earned but unpaid to the date of such
termination, PLUS (ii) any unreimbursed business expenses incurred by Employee
prior to such termination and presented for payment pursuant to Section 2.06
hereof.
2.09 TERMINATION NOT FOR CAUSE. In the event the Company terminates the
Employee's employment with the Company for any reason other than as set forth in
Sections 2.07 or 2.08 above, the Company shall have no further obligations or
liability to Employee hereunder, except to pay to Employee (in addition to
benefits, if any, due or to become due under any insurance, retirement or other
similar plan of the company or any other person or entity) (i) the amount of
Employee's Base Salary in effect as of the date of termination earned but unpaid
to the date of such termination, PLUS (ii) any unpaid bonus declared or to be
declared by the Directors for prior periods and for the period in which such
termination shall occur (pro-rated to the date of such termination), PLUS (iii)
any unreimbursed business expenses incurred by Employee prior to his termination
and presented for payment pursuant to Section 2.06 hereof, PLUS (iv) amounts
payable pursuant to this Agreement as if the Employee was still employed by the
Company.
2.10 NOTICE AND POST-TERMINATION ARRANGEMENTS.
(a) Employee may terminate Employee's employment under this Agreement
only upon at least ninety (90) days' prior written notice.
(b) Upon Company's termination of this Agreement under Section 2.08 or
2.09 HEREOF, Company may require that Employee remain actively on the job for a
period ending ninety (90) days from the date of termination, with full Base
Salary and fringe benefits (subject to Section 2.10(d)), but Employee shall have
no right to remain on the job upon receipt of such notice.
(c) Subject to Section 2.10(d), Company shall have the right to
continue Employee's Base Salary and fringe benefits for a period designated by
Company but not to exceed two (2) years subsequent to the effective date of (i)
any termination under Section 2.08 or 2.09 or (ii) the expiration of the term of
this Agreement; provided, however, that Company shall so notify Employee within
ninety (90) days after the effective date of any termination under Section 2.08
or 2.09 hereof.
(d) Company shall have the option at any time to make a lump sum
payment of all amounts due Employee as Base Salary during any period or part
thereof for which Company has elected to continue Employee's Base Salary under
Section 2.10(c) hereof.
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<PAGE> 5
ARTICLE III
CONFIDENTIALITY AND NONCOMPETITION
The parties acknowledge that the Company presently conducts business
throughout the United States, Canada and Europe. Further, the parties
acknowledge that Employee is extremely knowledgeable about Company's services,
pricing, operations and customers.
3.01 CONFIDENTIALITY. Under no circumstances and at no time, during or
after the Employee's employment with the Company, shall Employee in any manner
whether directly or indirectly, use for his own benefit or the benefit of any
other person, firm, entity or corporation or disclose, divulge, render or offer,
any knowledge or information with respect to the confidential affairs or plans,
trade secrets or know-how of the Company and its subsidiaries and affiliates,
including, without limitation, any work product prepared by the Employee in the
course of his employment with the Company ("Confidential Information"), except
on behalf of the Company in the course of the proper performance of his duties
hereunder. Employee acknowledges and agrees that any and all such Confidential
Information will be received and held by him in a confidential capacity, and
that disclosure of such Confidential Information would pose a direct threat to
the Company in the hands of its competitors. For purposes of this section 3.01,
the term "Confidential Information" shall not include any information which is
generally available to the public other than as a result of a disclosure by
Employee.
3.02 COVENANT NOT TO COMPETE.
(a) During such time as the Employee is employed by the Company and
for such period after termination or expiration of this Agreement as Company has
elected to continue Employee's Base Salary under Section 2.10(c) or make a Lump
Sum Payment under Section 2.10(d), Employee hereby agrees that Employee will
not, singly, jointly, or as an employee, agent or partner of any partnership or
as an officer, agent, employee, director, stockholder (except for not more than
one percent (1%) of the outstanding stock of any company listed on a national
securities exchange or actively traded in the over-the-counter market) or
investor in any other corporation or entity, or as a consultant, advisor, or
independent contractor to any such partnership, corporation or entity, or in any
other capacity, directly, indirectly or beneficially,:
(i) own, manage, operate, join, control, or participate in the
ownership, management, operation, or control of, or work for (as an employee,
agent, consultant, advisor or independent contractor), or permit the use of his
name by, or provide financial or other assistance to, any person, partnership,
corporation, or entity which is in direct or indirect competition within the
United States or Canada (the "Protected Territory") with the business as
conducted by the Company on the date hereof or at any time during Employee's
employment with the Company;
(ii) induce or attempt to induce any person who, on the date
hereof or at any time during Employee's employment with the Company, is an
employee of the Company, to terminate his or her employment with the Company,
except in the proper performance of his duties hereunder; or
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<PAGE> 6
(iii) induce or attempt to induce any person, business, or entity
which is a contracting party with the Company or any of its affiliates, as of
the date hereof or at any time during Employee's employment with the Company (a
"Customer"), to terminate or modify in any way adverse to the interests of the
Company, any written or oral agreement or understanding with the Company, except
in the proper performance of his duties hereunder, and if any Customer attempts
to induce or solicit the Employee to perform or provide any services for it
other than in connection with the Company's or its affiliates' activities,
Employee shall immediately reject such offer or solicitation and inform such
Customer of the restrictions and obligations imposed on the Employee by this
Agreement.
(b) The Company and Employee agree that the covenants set forth in
this Section 3.02 have been negotiated with advice of counsel in the course of
the negotiation and execution of the Stock Purchase Agreement, which endeavor
shall result in the receipt by Employee of greater tangible and intangible
benefits than would otherwise accrue to him, and therefore the Company and
Employee agree that these covenants should and shall be enforced to the fullest
extent permitted by law. Accordingly, if in any judicial or similar proceeding a
court or any similar judicial body shall determine that such covenant is
unenforceable because it covers too extensive a geographical area or survives
too long a period of time, or for any other reason, then the parties intend that
such covenant shall be deemed to cover only such maximum geographical area and
maximum period of time and shall otherwise be deemed to be limited in such
manner as will permit enforceability by such court or similar body.
3.03 SPECIFIC PERFORMANCE. Employee agrees that his breach of the
provisions of Sections 3.01 or 3.02 above will cause irreparable damage to the
Company and that the recovery by the Company of money damages will not
constitute an adequate remedy for such breach. Accordingly, Employee agrees that
the provisions of Sections 3.01 or 3.02 above may be specifically enforced
against him in addition to any other rights or remedies available to the Company
on account of any such breach, and Employee expressly waives the defense in any
equitable proceeding that there is an adequate remedy at law for any such
breach.
ARTICLE IV
MISCELLANEOUS
4.01 TERMINATION OF PRIOR AGREEMENTS. This Agreement is intended to
supersede all prior employment agreements between Company and Employee. By
execution of this Agreement, Employee and Company hereby terminate that certain
Employment Agreement between Company and Employee dated January 20, 1989 and all
other prior employment agreements, which shall be of no further force and
effect.
4.02 ASSIGNMENT. This Agreement is personal to Employee and shall not
be assigned, transferred, hypothecated, pledged or in any way encumbered by him;
PROVIDED, that the rights and obligations of Employee hereunder shall be binding
upon, and inure to the benefit of, Employee's estate. This Agreement shall be
binding upon, and inure to the benefit of, the Company's successors and assigns.
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<PAGE> 7
4.03 AMENDMENT. This Agreement may not be amended, modified or
supplemented in any respect except by written agreement entered into by the
parties hereto.
4.04 GOVERNING LAW; CONSENT TO JURISDICTION. This Agreement shall be
governed by and construed in accordance with the laws of the Commonwealth of
Massachusetts without resort to its conflict of laws rules.
4.05 COUNTERPART; HEADINGS. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument. The headings of the
Articles and Sections of this Agreement are inserted for convenience only and
shall not constitute a part hereof.
4.06 ENTIRE AGREEMENT. This Agreement contains the entire agreement of
the parties pertaining to the subject matter contained in it.
4.07 NOTICES. All notices given hereunder shall be in writing and shall
be delivered personally or sent by prepaid registered or certified mail, return
receipt requested, or by nationally recognized overnight courier service, and
addressed as follows:
If to the Company:
Simonds Industries, Inc.
135 Intervale Road
Fitchburg, MA 01420
With a copy to each of:
SI Holding Corporation
c/o Fleet Venture Resources, Inc.
111 Westminster Street
Providence, RI 02903
Attention: Habib Y. Gorgi, Executive Vice President
Hinckley, Allen & Snyder
1500 Fleet Center
Providence, RI 02903
Attention: Richard G. Small, Esq.
If to Employee:
Ross B. George
Chief Executive Officer
Simonds Industries, Inc.
135 Intervale Road
Fitchburg, MA 01420
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<PAGE> 8
All notices shall be deemed to be given on the date received at the address of
the addressee, or, if delivered personally, on the date delivered.
4.08 SEVERABILITY. Any provision of this Agreement which is held by a
court of competent jurisdiction to be prohibited or unenforceable in any
jurisdiction(s) shall be, as to auch jurisdiction(s), ineffective to the extent
of such prohibition or unenforceability without invalidating the remaining
provisions of this Agreement or affecting the validity or enforceability of such
provision in any other jurisdiction.
IN WITNESS WHEREOF, Employee has executed this Agreement and the Company
has caused this Agreement to be executed as an instrument under seal as of the
day and year first above written.
SIMONDS INDUSTRIES, INC.
By:
--------------------------------
Title: Executive Vice President/CFO
-------------------------------
Ross B. George
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<PAGE> 9
EXHIBIT A
[Standard Executive Benefits Program]
<PAGE> 10
FIRST AMENDMENT TO
EMPLOYMENT AND NON-COMPETITION AGREEMENT
This First Amendment to that certain Employment and Non-Competition
Agreement (the "Agreement"), dated as of May 26, 1995, by and between Simonds
Industries Inc., a Delaware corporation (the "Company") as successor by merger
to the company formerly known as Simonds Industries Inc. ("Old Simonds"), and
Ross B. George of Fitchburg, Massachusetts ("Employee").
W I T N E S S E T H:
WHEREAS, the Company is the successor by merger to Old Simonds, and as a
result thereof is a party to the Agreement; and
WHEREAS, the Company and the Employee wish to amend the Agreement in the
manner set forth herein.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
herein contained, the parties hereto agree to amend the Agreement as follows:
1. Section 1.02 is amended in its entirety to provide as follows:
"1.02 CONTRACT TERM. "Contract Term" shall mean the period commencing
on May 26, 1995 through May 25, 2000, and continuing thereafter until
terminated as set forth herein."
2. Section 2.09 is amended in its entirety to provide as follows:
"2.09 TERMINATION NOT FOR CAUSE. At any time after May 25, 2000, the
Company may terminate the Employee's employment with the Company for
any reason other than as set forth in Sections 2.07 or 2.08 above, and
have no further obligations or liability to Employee hereunder, except
(A) to pay to Employee (in addition to benefits, if any, due or to
become due under any insurance, retirement or other similar plan of
the Company or any other person or entity) (i) the amount of
Employee's Base Salary in effect as of the date of termination for a
period of one year after the date of such termination payable as if
Employee was still employed by the Company, PLUS, (ii) any unpaid
bonus declared or to be declared by the Directors for prior periods,
PLUS (iii) any unreimbursed business expenses incurred by Employee
prior to his termination and presented for payment pursuant to Section
2.06 hereof, and (B) to provide Employee continued coverage under the
Company's Standard Executive Benefits Program in effect with respect
to
<PAGE> 11
Employee as of the date of termination for a period of one year after
the date of such termination."
3. Section 2.10(b) is amended in its entirety to provide as follows:
"(b) Upon Company's termination of this Agreement under Sections 2.08
or 2.09, Company may require that Employee remain actively on the job
for a period ending ninety (90) days from the date of termination,
with full Base Salary and fringe benefits pursuant to Section 2.09
(subject to Section 2.10(d)), but Employee shall have no right to
remain on the job upon receipt of such notice."
4. Section 4.07 is amended in its entirety to provide as follows:
"4.07 NOTICES. All notices given hereunder shall be in writing and
shall be delivered personally or sent by prepaid registered or
certified mail, return receipt requested, or by nationally recognized
overnight courier service, and addressed as follows:
If to the Company:
Simonds Industries Inc.
135 Intervale Road
Fitchburg, MA 01420
With a copy to each of:
Fleet Venture Resources, Inc.
50 Kennedy Plaza, Suite 1200
Providence, RI 02903
Attention: Habib Y. Gorgi, President
Edwards & Angell, LLP
One BankBoston Plaza
Providence, RI 02903
Attention: Richard G. Small, Esq.
If to Employee:
Ross B. George
Chief Executive Officer
Simonds Industries Inc.
135 Intervale Road
Fitchburg, MA 01420
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<PAGE> 12
All notices shall be deemed to be given on the date received at the
address of the addressee, or, if delivered personally, on the date
delivered."
IN WITNESS WHEREOF, Employee has executed this First Amendment to the
Agreement and the Company has caused this Agreement to be executed as an
instrument under seal as of this 7th day of July, 1998.
Simonds Industries Inc.
By: _________________________________
Title: ______________________________
_____________________________________
Ross B. George
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<PAGE> 13
EXHIBIT A
---------
[Standard Executive Benefits Program]
<PAGE> 1
EXHIBIT 10.2
EMPLOYMENT AND NON-COMPETITION AGREEMENT
EMPLOYMENT AND NON-COMPETITION AGREEMENT, dated as of May 26, 1995, by
and between SIMONDS INDUSTRIES, INC., a Delaware corporation (the "Company"),
and Joseph L. Sylvia of Princeton, Massachusetts ("Employee").
W I T N E S S E T H:
WHEREAS, the Company, SI Holding Corporation ("Holding"), the Company's
common stockholders (the "Stockholders") (including Employee), and certain other
parties, have entered into that certain Stock Purchase Agreement dated as of May
26, 1995 (the "Stock Purchase Agreement") pursuant to which Holding has agreed
to purchase from the Stockholders all of the outstanding common stock of the
Company; and
WHEREAS, the closing of the transactions under the Stock Purchase
Agreement is taking place on the date hereof; and
WHEREAS, the parties hereto acknowledge that Holding is making its
investment in the Company in part in reliance upon the Employee's expertise and
knowledge in the industries in which the Company shall conduct its business; and
WHEREAS, Employee has agreed to enter into this Agreement in order to
assure company of Employee's continued expertise and involvement in the conduct
of the Company's business, subject to the terms and conditions as hereinafter
provided; and
WHEREAS, the Company desires to employ Employee as Chief Financial
Officer/Executive Vice President of the Company and Employee desires to be
employed by the Company in such capacity, upon the terms and conditions set
forth in this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
herein contained, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
1.01 CAUSE. Cause shall mean (a) an act of fraud, embezzlement,
misappropriation or breach of fiduciary duty against the Company by Employee, as
determined by the Company's Board of Directors in its reasonable discretion, (b)
any intentional, knowing or reckless action or inaction by Employee which causes
the breach of a representation, warranty or covenant by the Company or any
Management Stockholder under any of the Related Agreements (as such terms are
defined in the Stockholder Agreement), (c) conviction of Employee by a court of
competent jurisdiction of or a plea of guilty or nolo contendere by Employee to
any felony or crime involving moral turpitude, (d) the habitual drug addiction
or intoxication of Employee, (e) the willful failure or refusal of Employee to
perform his duties under the terms of his employment with the Company, including
the willful failure or refusal of Employee to follow the instructions
<PAGE> 2
of the Company's Board of Directors, (f) the breach by Employee of any terms of
this Agreement (including, without limitation, the breach of any
non-competition, non-disclosure, or other restrictive covenants), or (g) the
breach by Employee of any of the covenants, terms, and provisions of Sections
3.1, 5 and 7 of the Stockholder Agreement.
1.02 CONTRACT TERM. "Contract Term" shall mean the period commencing
on the Effective Date and expiring five (5) years after the Effective Date.
1.03 DIRECTORS. "Directors" shall mean the Board of Directors of the
Company.
1.04 DISABILITY. Employee shall be deemed to have a disability if an
independent medical doctor (selected by the Company's health or disability
insurer) certifies that such Employee has for six (6) months, consecutive or
non-consecutive, in any twelve (12) month period been disabled in such a manner
that he is unable to perform the essential functions of his then current
position. Any refusal by Employee to submit to a medical examination for the
purpose of certifying disability shall be deemed to constitute conclusive
evidence of such Employee's disability.
1.05. EFFECTIVE DATE. "Effective Date" shall mean the date of this
Agreement.
1.06 STOCKHOLDER AGREEMENT. "Stockholder Agreement" means that certain
stockholder agreement by and among the common shareholders of Holding dated as
of May 26, 1995.
ARTICLE II
EMPLOYMENT AND SERVICES
2.01 CAPACITY AND SERVICES. The Company hereby employs Employee to
serve in the capacity of Chief Financial Officer/Executive Vice President of the
Company, and Employee hereby accepts such employment, upon the terms and
conditions set forth in this Agreement. During the period the Employee is
employed by the Company, Employee shall devote substantially all of his
attention and energies on a full-time basis to the business and affairs of the
Company and use his best efforts to promote its interests; provided, however,
that Employee may devote reasonable periods of time for personal purposes, trade
associations and charitable activities consistent with past practices so long as
such purposes or activities do not (i) cause or result in a breach of Article
III hereof or (ii) adversely affect the interests of the Company or materially
detract from or interfere with the performance of the services otherwise
required to be performed by Employee as set forth herein. While the Employee is
employed by the Company, Employee shall neither accept nor hold any other
employment without approval of the Directors. In his capacity as Chief Financial
Officer/Executive Vice President of the Company, Employee shall be responsible
for the supervision and control over, and responsibility for, the financial
affairs and operations of the Company, and shall have such other powers and
duties as determined by the Directors from time to time. Such services to be
provided by Employee hereunder shall be provided for the benefit of the Company
without regard to whether any of the
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<PAGE> 3
Company's operations are conducted directly by the Company, through Holding, or
through any subsidiaries, joint ventures or unincorporated division of the
Company. While the Employee is employed by the Company, the Company shall
provide Employee with an office and support staff reasonably necessary for the
proper performance of his duties hereunder and consistent with the past
practices of the Company.
2.02 LIMITATION ON AUTHORITY OF EMPLOYEE. The authority of Employee as
Chief Financial Officer/Executive Vice President of the Company shall have such
limitations as shall be prescribed by the Directors.
2.03 BASE SALARY. The Company shall pay Employee a salary, determined
on an annual basis by the Directors, for the services rendered by Employee to
the Company while the Employee is employed by the Company (the "Base Salary").
Employee's Base Salary shall in no event be less than his annual salary in
effect on May 26, 1995, as adjusted by any increases during the term of this
Agreement, and shall be amortized for payment upon such dates as Company
customarily pays its employees.
2.04 BONUS. While the Employee is employed by the Company, Employee
shall be entitled to participate in any bonus plan approved by the Directors.
2.05 FRINGE BENEFITS. While the Employee is employed by the Company,
Employee shall be entitled to such employee fringe benefits as are set forth in
the Company's Standard Executive Benefits Program, with present provisions as
set forth generally in EXHIBIT A attached hereto. Additionally, Employee shall
be entitled to a Company vehicle approved by the Directors as to make and model.
If Employee recognizes additional taxable income as a result of use of a Company
vehicle, Company shall pay Employee such additional amount as shall be necessary
to cover such additional tax on a grossed up basis. Employee's participation in
any benefit program shall be at the same level of employee/employer contribution
as has been set for all participants in such plan.
2.06 BUSINESS EXPENSES. While the Employee is employed by the Company,
the Company will reimburse Employee for all reasonable travel and out-of-pocket
expenses actually incurred by him, consistent with past practices of the
Company, or as otherwise directed by the Directors for the purpose of and in
connection with performing his services to the Company hereunder. Such
reimbursement shall be made upon presentation by Employee to the Company of
vouchers or other statements itemizing such expenses in reasonable detail.
2.07 DEATH OR DISABILITY. In the event of the death or Disability of
Employee while the Employee is employed by the Company, the Company shall have
no further obligations or liability to Employee hereunder, except to pay to
Employee or Employee's estate (i) the amount of Employee's Base Salary in effect
as of the date of death or Disability earned but unpaid to the date of
Employee's death or Disability (including Base Salary for a period of ninety
(90) days between date of Disability and the commencement of disability
insurance benefits under the Company's policy), PLUS (ii) any unpaid bonus
declared or to be declared by the Directors for prior periods and for the period
in which his death or Disability shall occur (prorated to the date
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<PAGE> 4
of such death or Disability), PLUS (iii) any unreimbursed business expenses
incurred by Employee prior to his death or Disability and presented for payment
pursuant to Section 2.06 hereof.
2.08 VOLUNTARY TERMINATION BY EMPLOYEE OR TERMINATION FOR CAUSE. In
the event the Employee voluntarily terminates his employment with the Company or
the Employee's employment with the Company is terminated for Cause, the Company
shall have no further obligations or liability to Employee hereunder, except to
pay to Employee (in addition to and without regard for benefits, if any, due or
to become due under any insurance, retirement or other similar plan of the
Company or any other person or entity) (i) the amount of Employee's Base Salary
in effect as of the date of termination earned but unpaid to the date of such
termination, PLUS (ii) any unreimbursed business expenses incurred by Employee
prior to such termination and presented for payment pursuant to Section 2.06
hereof.
2.09 TERMINATION NOT FOR CAUSE. In the event the Company terminates
the Employee's employment with the Company for any reason other than as set
forth in Sections 2.07 or 2.08 above, the Company shall have no further
obligations or liability to Employee hereunder, except to pay to Employee (in
addition to benefits, if any, due or to become due under any insurance,
retirement or other similar plan of the company or any other person or entity)
(i) the amount of Employee's Base Salary in effect as of the date of termination
earned but unpaid to the date of such termination, PLUS (ii) any unpaid bonus
declared or to be declared by the Directors for prior periods and for the period
in which such termination shall occur (pro-rated to the date of such
termination), PLUS (iii) any unreimbursed business expenses incurred by Employee
prior to his termination and presented for payment pursuant to Section 2.06
hereof, PLUS (iv) amounts payable pursuant to this Agreement as if the Employee
was still employed by the Company.
2.10 NOTICE AND POST-TERMINATION ARRANGEMENTS.
(a) Employee may terminate Employee's employment under this Agreement
only upon at least ninety (90) days' prior written notice.
(b) Upon Company's termination of this Agreement under Section 2.08 or
2.09 hereof, Company may require that Employee remain actively on the job for a
period ending ninety (90) days from the date of termination, with full Base
Salary and fringe benefits (subject to Section 2.10(d)), but Employee shall have
no right to remain on the job upon receipt of such notice.
(c) Subject to Section 2.10(d), Company shall have the right to continue
Employee's Base Salary and fringe benefits for a period designated by Company
but not to exceed two (2) years subsequent to the effective date of (i) any
termination under Section 2.08 or 2.09 or (ii) the expiration of the term of
this Agreement; provided, however, that Company shall so notify Employee within
ninety (90) days after the effective date of any termination under Section 2.08
or 2.09 hereof.
-4-
<PAGE> 5
(d) Company shall have the option at any time to make a lump sum payment
of all amounts due Employee as Base Salary during any period or part thereof for
which Company has elected to continue Employee's Base Salary under Section
2.10(c) hereof.
ARTICLE III
CONFIDENTIALITY AND NONCOMPETITION
The parties acknowledge that the Company presently conducts business
throughout the United States, Canada and Europe. Further, the parties
acknowledge that Employee is extremely knowledgeable about Company's services,
pricing, operations and customers.
3.01 CONFIDENTIALITY. Under no circumstances and at no time, during or
after the Employee's employment with the Company, shall Employee in any manner
whether directly or indirectly, use for his own benefit or the benefit of any
other person, firm, entity or corporation or disclose, divulge, render or offer,
any knowledge or information with respect to the confidential affairs or plans,
trade secrets or know-how of the Company and its subsidiaries and affiliates,
including, without limitation, any work product prepared by the Employee in the
course of his employment with the Company ("Confidential Information"), except
on behalf of the Company in the course of the proper performance of his duties
hereunder. Employee acknowledges and agrees that any and all such Confidential
Information will be received and held by him in a confidential capacity, and
that disclosure of such Confidential Information would pose a direct threat to
the Company in the hands of its competitors. For purposes of this Section 3.01,
the term "Confidential Information" shall not include any information which is
generally available to the public other than as a result of a disclosure by
Employee.
3.02 COVENANT NOT TO COMPETE.
(a) During such time as the Employee is employed by the Company and
for such period after termination or expiration of this Agreement as Company has
elected to continue Employee's Base Salary under Section 2.10(c) or make a Lump
Sum Payment under Section 2.10(d), Employee hereby agrees that Employee will
not, singly, jointly, or as an employee, agent or partner of any partnership or
as an officer, agent, employee, director, stockholder (except for not more than
one percent (1%) of the outstanding stock of any company listed on a national
securities exchange or actively traded in the over-the-counter market) or
investor in any other corporation or entity, or as a consultant, advisor, or
independent contractor to any such partnership, corporation or entity, or in any
other capacity, directly, indirectly or beneficially:
(i) own, manage, operate, join, control, or participate in the
ownership, management, operation, or control of, or work for (as an
employee, agent, consultant, advisor or independent contractor), or
permit the use of his name by, or provide financial or other assistance
to, any person, partnership, corporation, or entity which is in direct
or indirect competition within the United States or Canada (the
"Protected Territory") with the business as conducted by the
-5-
<PAGE> 6
Company on the date hereof or at any time during Employee's employment
with the Company;
(ii) induce or attempt to induce any person who, on the date
hereof or at any time during Employee's employment with the Company, is
an employee of the Company, to terminate his or her employment with the
Company, except in the proper performance of his duties hereunder; or
(iii) induce or attempt to induce any person, business, or entity
which is a contracting party with the Company or any of its affiliates,
as of the date hereof or at any time during Employee's employment with
the Company (a "Customer"), to terminate or modify in any way adverse to
the interests of the Company, any written or oral agreement or
understanding with the Company, except in the proper performance of his
duties hereunder, and if any Customer attempts to induce or solicit the
Employee to perform or provide any services for it other than in
connection with the Company's or its affiliates' activities, Employee
shall immediately reject such offer or solicitation and inform such
Customer of the restrictions and obligations imposed on the Employee by
this Agreement.
(b) The Company and Employee agree that the covenants set forth in
this Section 3.02 have been negotiated with advice of counsel in the course of
the negotiation and execution of the Stock Purchase Agreement, which endeavor
shall result in the receipt by Employee of greater tangible and intangible
benefits than would otherwise accrue to him, and therefore the Company and
Employee agree that these covenants should and shall be enforced to the fullest
extent permitted by law. Accordingly, if in any judicial or similar proceeding a
court or any similar judicial body shall determine that such covenant is
unenforceable because it covers too extensive a geographical area or survives
too long a period of time, or for any other reason, then the parties intend that
such covenant shall be deemed to cover only such maximum geographical area and
maximum period of time and shall otherwise be deemed to be limited in such
manner as will permit enforceability by such court or similar body.
3.03 SPECIFIC PERFORMANCE. Employee agrees that his breach of the
provisions of Sections 3.01 or 3.02 above will cause irreparable damage to the
Company and that the recovery by the Company of money damages will not
constitute an adequate remedy for such breach. Accordingly, Employee agrees that
the provisions of Sections 3.01 or 3.02 above may be specifically enforced
against him in addition to any other rights or remedies available to the Company
on account of any such breach, and Employee expressly waives the defense in any
equitable proceeding that there is an adequate remedy at law for any such
breach.
ARTICLE IV
MISCELLANEOUS
4.01 TERMINATION OF PRIOR AGREEMENTS. This Agreement is intended to
supersede all prior employment agreements between Company and Employee. By
execution of this
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<PAGE> 7
Agreement, Employee and Company hereby terminate that certain Employment
Agreement between Company and Employee dated January 20, 1989 and all other
prior employment agreements, which shall be of no further force and effect.
4.02 ASSIGNMENT. This Agreement is personal to Employee and shall not
assigned, transferred, hypothecated, pledged or in any way encumbered by him;
PROVIDED, that the rights and obligations of Employee hereunder shall be binding
upon, and inure to the benefit of, Employee's estate. This Agreement shall be
binding upon, and inure to the benefit of, the Company's successors and assigns.
4.03 AMENDMENT. This Agreement may not be amended, modified or
supplemented in any respect except by written agreement entered into by the
parties hereto.
4.04 GOVERNING LAW; CONSENT TO JURISDICTION. This Agreement shall be
governed by and construed in accordance with the laws of the Commonwealth of
Massachusetts without resort to its conflict of laws rules.
4.05 COUNTERPART; HEADINGS. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument. The headings of the
Articles and Sections of this Agreement are inserted for convenience only and
shall not constitute a part hereof.
4.06 ENTIRE AGREEMENT. This Agreement contains the entire agreement of
the parties pertaining to the subject matter contained in it.
4.07 NOTICES. All notices given hereunder shall be in writing and
shall be delivered personally or sent by prepaid registered or certified mail,
return receipt requested, or by nationally recognized overnight courier service,
and addressed as follows:
If to the Company:
Simonds Industries, Inc.
135 Intervale Road
Fitchburg, MA 01420
With a copy to each of:
SI Holding Corporation
c/o Fleet Venture Resources, Inc.
111 Westminster Street
Providence, RI 02903
Attention: Habib Y. Gorgi, Executive Vice President
-7-
<PAGE> 8
Hinckley, Allen & Snyder
1500 Fleet Center
Providence, RI 02903
Attention: Richard G. Small, Esq.
If to Employee:
Joseph L. Sylvia
Chief Financial Officer/Executive Vice President
Simonds Industries, Inc.
135 Intervale Road
Fitchburg, MA 01420
All notices shall be deemed to be given on the date received at the address of
the addressee, or, if delivered personally, on the date delivered.
4.08 SEVERABILITY. Any provision of this Agreement which is held by a
court of competent jurisdiction to be prohibited or unenforceable in any
jurisdiction(s) shall be, as to such jurisdiction(s), ineffective to the extent
of such prohibition or unenforceability without invalidating the remaining
provisions of this Agreement or affecting the validity or enforceability of such
provision in any other jurisdiction.
IN WITNESS WHEREOF, Employee has executed this Agreement and the Company
has caused this Agreement to be executed as an instrument under seal as of the
day and year first above written.
SIMONDS INDUSTRIES, INC.
By:
---------------------
Title: President/CEO
------------------------
Joseph L. Sylvia
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<PAGE> 9
EXHIBIT A
[Standard Executive Benefits Program]
-9-
<PAGE> 10
FIRST AMENDMENT TO
EMPLOYMENT AND NON-COMPETITION AGREEMENT
This First Amendment to that certain Employment and Non-Competition
Agreement (the "Agreement), dated as of May 26, 1995, by and between Simonds
Industries Inc., a Delaware corporation (the "Company") as successor by merger
to the company formerly known as Simonds Industries Inc. ("Old Simonds"), and
Joseph L. Sylvia of Fitchburg, Massachusetts ("Employee").
W I T N E S S E T H:
WHEREAS, the Company is the successor by merger to Old Simonds, and as a
result thereof is a party to the Agreement; and
WHEREAS, the Company and the Employee wish to amend the Agreement in the
manner set forth herein.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
herein contained, the parties hereto agree to amend the Agreement as follows:
1. Section 1.02 is amended in its entirety to provide as follows:
"1.02 CONTRACT TERM. "Contract Term" shall mean the period commencing
on May 26, 1995 through May 25, 2000, and continuing thereafter until
terminated as set forth herein."
2. Section 2.09 is amended in its entirety to provide as follows:
"2.09 TERMINATION NOT FOR CAUSE. After May 25, 2000, the Company may
terminate the Employee's employment with the Company for any reason
other than as set forth in Sections 2.07 or 2.08 above, and have no
further obligations or liability to Employee hereunder, except (A) to
pay to Employee (in addition to benefits, if any, due or to become due
under any insurance, retirement or other similar plan of the Company
or any other person or entity) (i) the amount of Employee's Base
Salary in effect as of the date of termination for a period of one
year after the date of such termination payable as if Employee was
still employed by the Company, PLUS, (ii) any unpaid bonus declared or
to be declared by the Directors for prior periods, PLUS (iii) any
unreimbursed business expenses incurred by Employee prior to his
termination and presented for payment pursuant to Section 2.06 hereof,
and (B) to provide Employee continued coverage under the Company's
Standard Executive Benefits Program in effect with respect to Employee
as of the date of termination for a period of one year after the date
of such termination."
<PAGE> 11
3. Section 2.10(b) is amended in its entirety to provide as follows:
"(b) Upon Company's termination of this Agreement under Sections 2.08
or 2.09, Company may require that Employee remain actively on the job
for a period ending ninety (90) days from the date of termination,
with full Base Salary and fringe benefits pursuant to Section 2.09
(subject to Section 2.10(d)), but Employee shall have no right to
remain on the job upon receipt of such notice."
4. Section 4.07 is amended in its entirety to provide as follows:
"4.07 NOTICES. All notices given hereunder shall be in writing and
shall be delivered personally or sent by prepaid registered or
certified mail, return receipt requested, or by nationally recognized
overnight courier service, and addressed as follows:
If to the Company:
Simonds Industries Inc.
135 Intervale Road
Fitchburg, MA 01420
With a copy to each of:
Fleet Venture Resources, Inc.
50 Kennedy Plaza, Suite 1200
Providence, RI 02903
Attention: Habib Y. Gorgi, President
Edwards & Angell, LLP
One BankBoston Plaza
Providence, RI 02903
Attention: Richard G. Small, Esq.
If to Employee:
Joseph L. Sylvia
Executive Vice President and
Chief Financial Officer
Simonds Industries Inc.
135 Intervale Road
Fitchburg, MA 01420
-2-
<PAGE> 12
All notices shall be deemed to be given on the date received at the
address of the addressee, or, if delivered personally, on the date
delivered."
IN WITNESS WHEREOF, Employee has executed this First Amendment to the
Agreement and the Company has caused this Agreement to be executed as an
instrument under seal as of the 7th day of July, 1998.
Simonds Industries Inc.
By: _________________________________
Title: ______________________________
_____________________________________
Joseph L. Sylvia
-3-
<PAGE> 13
EXHIBIT A
---------
[Standard Executive Benefits Program]
<PAGE> 1
EXHIBIT 10.3
SIMONDS INDUSTRIES INC.
EMPLOYMENT AGREEMENT
This Agreement is made this 1st day of June, 1993, by and between
Simonds Industries Inc., a corporation organized and existing under the laws of
Delaware ("Company") with principal offices in Fitchburg, Massachusetts, and
Robert Deedrick, an individual with principal residency in Massachusetts
("Employee").
Company hereby agrees to employ Employee, and Employee hereby accepts
such employment with Company upon the following terms and conditions:
1.0 POSITION AND TITLE. Employee's job title is Vice President of
Manufacturing. He is directly responsible to the President.
2.0 TERM. The term of this Agreement shall commence on the date hereof and
shall continue evergreen hereafter until terminated by either party as
provided hereinafter; provided, however, that the provisions of
Paragraph 7 shall survive the termination of this Agreement.
3.0 BASE COMPENSATION. As Base Compensation, Employee shall be paid his
current rate of compensation upon such dates as Company customarily pays
its executive employees. Employee's Base Compensation shall be reviewed
in accordance with standard corporate policy and procedure.
4.0 BONUS. Employee shall be entitled to participate in any Executive Bonus
Plan approved by the Board of Directors for Company executives in
general. While there are no guarantees that there will be a bonus plan
in any particular year, or that any bonus plan will be funded at any
particular level, Employee is to participate in any such plan without
discrimination.
5.0 BENEFITS. Employee shall be entitled to participate in any Executive
Benefits Program approved by the Board of Directors for Company
executives in general. Additionally, Employee shall be entitled to a
Company vehicle approved by the President as to make, model, and
equipment. Employee's participation in any benefit program shall be at
the same level of employee/employer contribution as has been set for all
participants in such plans, in accordance with applicable law.
6.0 TERMINATION
(a) Employee may terminate Employee's employment under this Agreement
only upon at least ninety (90) days' prior written notice given
to Company.
(b) Company may terminate this Agreement only upon at least one (1)
year's prior written notice given to Employee. Company may
require that Employee remain
<PAGE> 2
actively on the job for a period ending ninety (90) days from the
date of such notice, but Employee shall have no right to remain
on the job upon receipt of such notice.
(c) Company and Employee agree that these termination provisions are
fair and reasonable, and that any termination hereof in
accordance herewith shall be without recourse against the
terminating party, subject to the provisions of section 7.0, et
seq., hereof.
7.0 CONFIDENTIALITY; NON-COMPETITION. Employee acknowledges and agrees that
his position with the Company is unique and of singular importance to
the success of the Company. In connection with his performance of duties
hereunder, Employee will necessarily be entrusted with information which
are confidential and proprietary trade secrets of the Company. Employee
acknowledges and agrees that the release of any such information or
materials to a third party, without the express written consent of the
company, would cause immediate and irreparable harm to the Company.
7.1 Employee shall not disclose to any third party any information or
materials of the Company to the extent that same are proprietary to, or
the "trade secrets" of the Company without limitation as to time.
7.2 Employee shall not compete, directly or indirectly, in North America, as
an employee, agent, consultant, owner, partner or otherwise in any
business entity, in the business engaged in by the Company and shall not
offer to deal with (in his individual capacity or on behalf of any
entity in which he is a shareholder, partner or otherwise has an
ownership interest or by which he is employed), directly or indirectly,
nor deal with, directly or indirectly, any entity or product which
competes with, or materially replicates, any product or service (or is a
reasonable extension of such product or service) currently offered by
Company, for so long as Employee receives compensation and benefits from
Company and for a period of one year thereafter (provided, however, that
nothing contained herein shall prevent or restrict Employee from owning
or acquiring, directly or indirectly, not more than five percent (5%) of
the securities of any publicly traded company for the sole purpose of
passive investment); and
7.3 Employee shall not solicit the employees or former employees of the
Company for the purpose of competing with the Company for so long as
Employee is restricted from competing with Company pursuant to the
preceding paragraph.
8.0 MISCELLANEOUS
8.1 This Agreement shall be governed by, and construed and interpreted in
accordance with, the laws of Massachusetts, whose courts shall be the
exclusive judicial forum for any and all disputes arising herefrom.
-2-
<PAGE> 3
8.2 This Agreement constitutes the sole and entire, integrated agreement by
and between the parties with respect to the subject matter hereof, and
the parties agree that upon the execution and effectiveness of this
Agreement, all prior understandings and agreements (whether written or
oral) between Company and Employee regarding Employee's employment by
Company shall automatically be terminated. It may not be modified except
in a writing signed by both parties. Rights may not be assigned, nor
duties delegated, hereunder except in a writing signed by both parties.
8.3 The provisions of the Agreement are intended to be severable, and should
any court of competent jurisdiction find unenforceable any provision(s)
hereof, the same shall be stricken and the remaining provisions shall
continue to be the enforceable agreement of the parties.
8.4 All notices, requests, demands, and other communications under this
Agreement shall be in writing and shall be deemed to have been duly
given on the date of service, if served personally on the party to whom
notice is to be given, or on the third day after mailing, if mailed to
the party to whom notice is to be given, by registered or certified
first class mail, postage prepaid, return receipt requested, or on the
date of telecopying, if sent by telecopy, or on the day after mailing,
if mailed by overnight courier service and properly addressed.
IN WITNESS WHEREOF, the parties have hereunto subscribed on the date
first above written.
Simonds Industries Inc.
by: /s/ Ross B. George /s/ Robert Deedrick
------------------ -------------------
Ross B. George Robert Deedrick
President Employee
-3-
<PAGE> 1
EXHIBIT 10.4
SIMONDS INDUSTRIES INC.
EMPLOYMENT AGREEMENT
This Agreement is made this 31st day of March, 1995, by and between
Simonds Industries Inc., a corporation organized and existing under the laws of
Delaware ["Company"] with principal offices in Fitchburg, Massachusetts, and
James Palmer, an individual with principal residency in Massachusetts
["Employee"].
Company hereby agrees to employ Employee, and Employee hereby accepts such
employment with Company upon the following terms and conditions:
1.0 POSITION AND TITLE. Employee's job title is Vice President of Sales and
Marketing - Metal Products. He is directly responsible to the President.
2.0 TERM. The term of this Agreement shall commence on the date hereof and
shall continue evergreen hereafter until terminated by either party as provided
hereinafter; provided, however, that the provisions of Paragraph 7 shall survive
the termination of this Agreement.
3.0 BASE COMPENSATION. As Base Compensation, Employee shall be paid an
annualized salary of $103,500 upon such dates as Company customarily pays its
executive employees. Employee's Base Compensation shall be reviewed in
accordance with standard corporate policy and procedure.
4.0 BONUS. Employee shall be entitled to participate in any Executive Bonus
Plan approved by the board of directors for Company executives in general. While
there are no guarantees that there will be a bonus plan in any particular year,
or that any bonus plan will be funded at any particular level, Employee is to
participate in any such plan without discrimination.
5.0 BENEFITS. Employee shall be entitled to participate in any Executive
Benefits Program approved by the board of directors for Company executives in
general. Additionally, Employee shall be entitled to a Company vehicle approved
by the President as to make, model and equipment. Employee's participation in
any benefit program shall be at the same level of employee/employer contribution
as has been set for all participants in such plans, in accordance with
applicable law.
6.0 TERMINATION.
(a) Employee may terminate Employee's employment under this Agreement
only upon at least ninety (90) days' prior written notice given to Company.
(b) Company may terminate this Agreement only upon at least one (1)
year's prior written notice given to Employee. Company may require that Employee
remain actively on the job for a period ending ninety (90) days from the date of
such notice, but Employee shall have no right to remain on the job upon receipt
of such notice.
<PAGE> 2
(c) Company and Employee agree that these termination provisions are
fair and reasonable, and that any termination hereof in accordance herewith
shall be without recourse against the terminating party, subject to the
provisions of section 7.0, et seq., hereof.
7.0 CONFIDENTIALITY; NON-COMPETITION. Employee acknowledges and agrees that
his position with the Company is unique and of singular importance to the
success of the Company. In connection with his performance of duties hereunder,
Employee will necessarily be entrusted with information which are confidential
and proprietary trade secrets of the Company. Employee acknowledges and agrees
that the release of any such information or materials to a third party, without
the express written consent of the Company, would cause immediate and
irreparable harm to the Company.
7.1 Employee shall not disclose to any third party any information or
materials of the Company to the extent that same are proprietary to, or the
"trade secrets" of the Company without limitation as to time.
7.2 Employee shall not compete, directly or indirectly, in North
America, as an employee, agent, consultant, owner, partner or otherwise in any
business entity, in the business engaged in by the Company and shall not offer
to deal with (in his individual capacity or on behalf of any entity in which he
is a shareholder, partner or otherwise has an ownership interest or by which he
is employed), directly or indirectly, nor deal with, directly or indirectly, any
entity or product which competes with, or materially replicates, any product or
service (or is a reasonable extension of such product or service) currently
offered by Company, for so long as Employee receives compensation and benefits
from Company and for a period of one year thereafter (provided, however, that
nothing contained herein shall prevent or restrict Employee from, owning or
acquiring, directly or indirectly, not more than five percent (5%) of the
securities of any publicly traded company for the sole purpose of passive
investment); and
7.3 Employee shall not solicit the employees or former employees of the
Company for the purpose of competing with the Company for so long as Employee is
restricted from competing with Company pursuant to the preceding paragraph.
8.0 MISCELLANEOUS.
8.1 This Agreement shall be governed by, and construed and interpreted
in accordance with, the laws of Massachusetts, whose courts shall be the
exclusive judicial forum for any and all disputes arising herefrom.
8.2 This Agreement constitutes the sole and entire, integrated agreement
by and between the parties with respect to the subject matter hereof, and the
parties agree that upon the execution and effectiveness of this Agreement, all
prior understandings and agreements (whether written or oral) between Company
and Employee regarding Employee's employment by Company shall automatically be
terminated. It may not be modified except in a writing signed by both parties.
Rights may not be assigned, nor duties delegated, hereunder except in a writing
signed by both parties.
-2-
<PAGE> 3
8.3 The provisions of this Agreement are intended to be severable, and
should any court of competent jurisdiction find unenforceable any provision(s)
hereof, the same shall be stricken and the remaining provisions shall continue
to be the enforceable agreement of the parties.
8.4 All notices, requests, demands and other communications under this
Agreement shall be in writing and shall be deemed to have been duly given on the
date of service, if served personally on the party to whom notice is to be
given, or on the third day after mailing, if mailed to the party to whom notice
is to be given, by registered or certified first class mail, postage prepaid,
return receipt requested, or on the date of telecopying, if sent by telecopy, or
on the day after mailing, if mailed by overnight courier service and properly
addressed.
IN WITNESS WHEREOF, the parties have hereunto subscribed on the date first
above-written,
Simonds Industries Inc.
By ___________________________ _______________________
Ross B. George James Palmer
President Employee
-3-
<PAGE> 1
EXHIBIT 10-5
SIMONDS INDUSTRIES INC.
EMPLOYMENT AGREEMENT
This Agreement is made this 7th day of May, 1992, by and between Simonds
Industries Inc., a corporation organized and existing under the laws of Delaware
["Company"] with principal offices in Fitchburg, Massachusetts, and Roland
Richard, an individual with principal residency in Massachusetts ["Employee"].
Company hereby agrees to employ Employee, and Employee hereby accepts such
employment with Company upon the following terms and conditions:
1.0 POSITION AND TITLE. Employee's job title shall be Vice President (Wood).
He shall be directly responsible to the President.
2.0 TERM. The term of this Agreement shall commence on the date hereof and
shall continue evergreen hereafter until terminated by either party as provided
hereinafter; provided, however, that the provisions of Paragraph 7 shall survive
the termination of this Agreement.
3.0 BASE COMPENSATION. As Base Compensation, Employee shall be paid his
current rate of compensation upon such dates as Company customarily pays its
executive employees. Employee's Base Compensation shall be reviewed and set in
accordance with standard corporate policy and procedure.
4.0 BONUS. Employee shall be entitled to participate in any Executive Bonus
Plan approved by the board of directors for Company executives in general. While
there are no guarantees that there will be a bonus plan in any particular year,
or that any bonus plan will be funded at any particular level, Employee is to
participate in any such plan without discrimination.
5.0 BENEFITS. Employee shall be entitled to participate in any Executive
Benefits Program approved by the board of directors for Company executives in
general. Additionally, Employee shall be entitled to a Company vehicle approved
by the President as to make, model and equipment. Employee's participation in
any benefit program shall be at the same level of employee/employer contribution
as has been set for all participants in such plans, in accordance with
applicable law.
6.0 TERMINATION.
(a) Employee may terminate Employee's employment under this Agreement
only upon at least ninety (90) days' prior written notice given to Company.
(b) Company may terminate this Agreement only upon at least one (1)
year's prior written notice given to Employee. Company may require that Employee
remain actively on the job for a period ending ninety (90) days from the date of
such notice, but Employee shall have no right to remain on the job upon receipt
of such notice.
<PAGE> 2
(c) Company and Employee agree that these termination provisions are
fair and reasonable, and that any termination hereof, in accordance herewith,
shall be without recourse against the terminating party, subject to the
provisions of section 7.0, et seq., hereof.
7.0 CONFIDENTIALITY; NON-COMPETITION. Employee acknowledges and agrees that
his position with the Company is unique and of singular importance to the
success of the Company. In connection with his performance of duties hereunder,
Employee will necessarily be entrusted with information which are confidential
and proprietary trade secrets of the Company. Employee acknowledges and agrees
that the release of any such information or materials to a third party, without
the express written consent of the Company, would cause immediate and
irreparable harm to the Company.
7.1 Employee shall not disclose to any third party any information or
materials of the Company to the extent that same are proprietary to, or the
"trade secrets" of the Company without limitation as to time.
7.2 Employee shall not compete, directly or indirectly, in North
America, as an employee, agent, consultant, owner, partner or otherwise in any
business entity, in the business engaged in by the Company and shall not offer
to deal with (in his individual capacity or on behalf of any entity in which he
is a shareholder, partner or otherwise has an ownership interest or by which he
is employed), directly or indirectly, nor deal with, directly or indirectly, any
entity or product which competes with, or materially replicates, any product or
service (or is a reasonable extension of such product or service) currently
offered by Company, for so long as Employee receives compensation and benefits
from Company (provided, however, that nothing contained herein shall prevent or
restrict Employee from owning or acquiring, directly or indirectly, not more
than five percent (5%) of the securities of any publicly traded company for the
sole purpose of passive investment); and
7.3 Employee shall not solicit the employees or former employees of the
Company for the purpose of competing with the Company for so long as Employee is
restricted from competing with Company pursuant to the preceding paragraph.
8.0 MISCELLANEOUS.
8.1 This Agreement shall be governed by, and construed and interpreted
in accordance with, the laws of Massachusetts, whose courts shall be the
exclusive judicial forum for any and all disputes arising herefrom.
8.2 This Agreement constitutes the sole and entire, integrated agreement
by and between the parties with respect to the subject matter hereof, and the
parties agree that upon the execution and effectiveness of this Agreement, all
prior understandings and agreements (whether written or oral) between Company
and Employee regarding Employee's employment by Company shall automatically be
terminated. It may not be modified except in a writing signed by both parties.
-2-
<PAGE> 3
8.3 The provisions of this Agreement are intended to be severable, and
should any court of competent jurisdiction find unenforceable any provision(s)
hereof, the same shall be stricken and the remaining provisions shall continue
to be the enforceable agreement of the parties.
8.4 All notices, requests, demands and other communications under this
Agreement shall be in writing and shall be deemed to have been duly given on the
date of service, if served personally on the party to whom notice is to be
given, or on the third day after mailing, if mailed to the party to whom notice
is to be given, by registered or certified first class mail, postage prepaid,
return receipt requested, or on the date of telecopying, if sent by telecopy, or
on the day after mailing, if mailed by overnight courier service and properly
addressed.
IN WITNESS WHEREOF, the parties have hereunto subscribed on the date first
above-written.
Simonds Industries Inc.
By ___________________________ ______________________________
Ross B. George Roland Richard
President Employee
-3-
<PAGE> 1
EXHIBIT 10.6
SIMONDS INDUSTRIES INC.
EMPLOYMENT AGREEMENT
This Agreement is made this 14th day of November, 1995, by and between
Simonds Industries Inc., a corporation organized and existing under the laws of
Delaware ["Company"] with principal offices in Fitchburg, Massachusetts, and
F.A. DeVilling, III, an individual with principal residency in Massachusetts
["Employee"].
Company hereby agrees to employ Employee, and Employee hereby accepts such
employment with Company upon the following terms and conditions:
1.0 POSITION AND TITLE. Employee's job title is Vice President-Business
Development. He is directly responsible to the President.
2.0 TERM. The term of this Agreement shall commence on the date hereof and
shall continue evergreen hereafter until terminated by either party as provided
hereinafter; provided, however, that the provisions of Paragraph 7 shall survive
the termination of this Agreement.
3.0 BASE COMPENSATION. As Base Compensation, Employee shall be paid an
annualized salary of $110,000 upon such dates as Company customarily pays its
executive employees. Employee's Base Compensation shall be reviewed in
accordance with standard corporate policy and procedure.
4.0 BONUS. Employee shall be entitled to participate in any Executive Bonus
Plan approved by the board of directors for Company executives in general. While
there are no guarantees that there will be a bonus plan in any particular year,
or that any bonus plan will be funded at any particular level, Employee is to
participate in any such plan without discrimination.
5.0 BENEFITS. Employee shall be entitled to participate in any Executive
Benefits Program approved by the board of directors for Company executives in
general. Additionally, Employee shall be entitled to a Company vehicle approved
by the President as to make, model and equipment. Employee's participation in
any benefit program shall be at the same level of employee/employer contribution
as has been set for all participants in such plans, in accordance with
applicable law.
6.0 TERMINATION.
(a) Employee may terminate Employee's employment under this Agreement
only upon at least ninety (90) days' prior written notice given to Company.
(b) Company may terminate this Agreement only upon at least one (1)
year's prior written notice given to Employee. Company may require that Employee
remain actively on the job for a period ending ninety (90) days from the date of
such notice, but Employee shall have no right to remain on the job upon receipt
of such notice.
<PAGE> 2
(c) Company and Employee agree that these termination provisions are
fair and reasonable, and that any termination hereof in accordance herewith
shall be without recourse against the terminating party, subject to the
provisions of section 7.0, et seq., hereof.
7.0 CONFIDENTIALITY; NON-COMPETITION. Employee acknowledges and agrees that
his position with the Company is unique and of singular importance to the
success of the Company. In connection with his performance of duties hereunder,
Employee will necessarily be entrusted with information which are confidential
and proprietary trade secrets of the Company. Employee acknowledges and agrees
that the release of any such information or materials to a third party, without
the express written consent of the Company, would cause immediate and
irreparable harm to the Company.
7.1 Employee shall not disclose to any third party any information or
materials of the Company to the extent that same are proprietary to, or the
"trade secrets" of the Company without limitation as to time.
7.2 Employee shall not compete, directly or indirectly, in North
America, as an employee, agent, consultant, owner, partner or otherwise in any
business entity, in the business engaged in by the Company and shall not offer
to deal with (in his individual capacity or on behalf of any entity in which he
is a shareholder, partner or otherwise has an ownership interest or by which he
is employed), directly or indirectly, nor deal with, directly or indirectly, any
entity or product which competes with, or materially replicates, any product or
service (or is a reasonable extension of such product or service) currently
offered by Company, for so long as Employee receives compensation and benefits
from Company and for a period of one year thereafter (provided, however, that
nothing contained herein shall prevent or restrict Employee from owning or
acquiring, directly or indirectly, not more than five percent (5%) of the
securities of any publicly traded company for the sole purpose of passive
investment); and
7.3 Employee shall not solicit the employees or former employees of the
Company for the purpose of competing with the Company for so long as Employee is
restricted from competing with Company pursuant to the preceding paragraph.
8.0 MISCELLANEOUS.
8.1 This Agreement shall be governed by, and construed and interpreted
in accordance with, the laws of Massachusetts, whose courts shall be the
exclusive judicial forum for any and all disputes arising herefrom.
8.2 This Agreement constitutes the sole and entire, integrated agreement
by and between the parties with respect to the subject matter hereof, and the
parties agree that upon the execution and effectiveness of this Agreement, all
prior understandings and agreements (whether written or oral) between Company
and Employee regarding Employee's employment by Company shall automatically be
terminated. It may not be modified except in a writing signed by both parties.
Rights may not be assigned, nor duties delegated, hereunder except in a writing
signed by both parties.
-2-
<PAGE> 3
8.3 The provisions of this Agreement are intended to be severable, and
should any court of competent jurisdiction find unenforceable any provision(s)
hereof, the same shall be stricken and the remaining provisions shall continue
to be the enforceable agreement of the parties.
8.4 All notices, requests, demands and other communications under this
Agreement shall be in writing and shall be deemed to have been duly given on the
date of service, if served personally on the party to whom notice is to be
given, or on the third day after mailing, if mailed to the party to whom notice
is to be given, by registered or certified first class mail, postage prepaid,
return receipt requested, or on the date of telecopying, if sent by telecopy, or
on the day after mailing, if mailed by overnight courier service and properly
addressed.
IN WITNESS WHEREOF, the parties have hereunto subscribed on the date first
above-written,
Simonds Industries Inc.
By ___________________________ ________________________
Ross B. George F. A. DeVilling, III
President Employee
-3-
<PAGE> 1
EXHIBIT 10.7
SIMONDS INDUSTRIES INC.
EMPLOYMENT AGREEMENT
This Agreement is made this 31st day of March, 1998, by and between
Simonds Industries Inc., a corporation organized and existing under the laws of
Delaware ["Company"] with principal offices in Fitchburg, Massachusetts, and
Ronald Owens, an individual with principal residency in Florida ["Employee"].
Company hereby agrees to employ Employee, and Employee hereby accepts
such employment with Company upon the following terms and conditions:
1.0 POSITION AND TITLE. Employee's job title is Vice President of Business
Development. He is directly responsible to the President.
2.0 TERM. The term of this Agreement shall commence on the date hereof and shall
continue hereafter for a period of one (1) year or until sooner terminated by
either party as provided hereinafter; provided, however, that the provisions of
Paragraph 7 shall survive the termination of this Agreement. At lease ninety
(90) days prior to the expiration of this Agreement, Company and Employee will
meet to discuss a possible longer-term agreement, and, if both parties agree,
will negotiate reasonably with one another toward a longer-term agreement.
3.0 BASE COMPENSATION. As Base Compensation, Employee shall be paid the
annualized amount of $120,000 upon such dates as Company customarily pays its
executive employees. Employee's Base Compensation shall be reviewed and adjusted
periodically in accordance with standard corporate policy and procedure.
4.0 BONUS. Employee shall be entitled to participate in any Executive Bonus Plan
[a "Plan"] approved from time to time by the board of directors for Company
executives in general. While there are no guarantees that there will be a Plan
in any particular year, or that any Plan will be funded or paid at any
particular level, Employee is to participate in any such Plan without
discrimination, subject always to the provisions of any such Plan. The terms and
conditions of any Plan are incorporated herein by reference during the term of
such Plan.
5.0 BENEFITS. Employee shall be entitled to participate in any executive
benefits programs approved by the board of directors for Company executives in
general [the "Benefits"]. Employee's participation in any benefit program shall
be at the same level of employee/employer contribution as has been set for all
participants in such plans, in accordance with applicable law.
6.0 AUTOMOBILE. During the course of his active employment with Company and
primarily for business purposes, Employee shall be entitled to the use of a
Company vehicle approved by the President. The use of a Company vehicle is not a
"Benefit" for purposes of Section 8.2 and will be discontinued immediately when
Employee is no longer actively conducting business on behalf of the Company for
any reason whatsoever.
<PAGE> 2
7.0 TERMINATION.
7.1 Employee may terminate Employee's employment under this Agreement,
with cause, only upon at least ninety (90) days' prior written notice given to
Company.
7.2 Company may terminate this Agreement, with cause, only upon at
least thirty (30) days' prior written notice given to Employee. Company may
require that Employee remain actively on the job during such notice period, but
Employee shall have no right to remain on the job upon receipt of such notice.
7.3 Company and Employee agree that these termination provisions are
fair and reasonable, and that any termination hereof in accordance herewith
shall be without recourse against the terminating party, subject to the
provisions of section 8.0, et seq., hereof. Employee accepts the provisions of
this Agreement in lieu of, and Employee hereby waives, any standard policy
severance to which Employee might otherwise be entitled upon termination of
employment.
8.0 CONFIDENTIALITY, NON-COMPETITION. Employee acknowledges and agrees that his
position with the Company is unique and of singular importance to the success of
the Company. In connection with his performance of duties hereunder, Employee
will necessarily be entrusted with information which are confidential and
proprietary trade secrets of the Company. Employee acknowledges and agrees that
the release of any such information or materials to a third party, without the
express written consent of the Company, would cause immediate and irreparable
harm to the Company.
8.1 Employee shall not disclose to any third party any information or
materials of the Company to the extent that same are proprietary to, or the
"trade secrets" of the Company without limitation as to time.
8.2 Employee shall not compete, directly or indirectly, in North
America, as an employee, agent, consultant, owner, partner or otherwise in any
business entity, in the business engaged in by the Company and shall not offer
to deal with (in his individual capacity or on behalf of any entity in which he
is a shareholder, partner or otherwise has an ownership interest or by which he
is employed), directly or indirectly, nor deal with, directly or indirectly, any
entity or product which competes with, or materially replicates, any product or
service (or is a reasonable extension of such product or service) currently
offered by Company, for so long as Employee receives Base Compensation and
Benefits from Company and for a period of one year thereafter (provided,
however, that nothing contained herein shall prevent or restrict Employee from
owning or acquiring, directly or indirectly, not more than five percent (5%) of
the securities of any publicly traded company for the sole purpose of passive
investment); and
8.3 Employee shall not solicit the employees or former employees of the
Company for the purpose of competing with the Company for so long as Employee is
restricted from competing with Company pursuant to the preceding paragraph.
-2-
<PAGE> 3
9.0 MISCELLANEOUS.
9.1 This Agreement shall be governed by, and construed and interpreted
in accordance with, the laws of Massachusetts, whose courts shall be the
exclusive judicial forum for any and all disputes arising herefrom.
9.2 This Agreement constitutes the sole and entire, integrated
agreement by and between the parties with respect to the subject matter hereof,
and the parties agree that upon the execution and effectiveness of this
Agreement, all prior understandings and agreements (whether written or oral)
between Company and Employee regarding Employee's compensation, benefits,
severance, rights upon termination and employment by Company are hereby
terminated. This Agreement may not be modified except in a writing signed by
both parties. Rights may not be assigned, nor duties delegated, hereunder except
in a writing signed by both parties.
9.3 The provisions of this Agreement are intended to be severable, and
should any court of competent jurisdiction find unenforceable any provision(s)
hereof, the same shall be stricken and the remaining provisions shall continue
to be the enforceable agreement of the parties.
9.4 All notices, requests, demands and other communications under this
Agreement shall be in writing and shall be deemed to have been duly given on the
date of service, if served personally on the party to whom notice is to be
given, or on the third day after mailing, if mailed to the party to whom notice
is to be given, by registered or certified first class mail, postage prepaid,
return receipt requested, or on the date of telecopying, if sent by telecopy, or
on the day after mailing, if mailed by overnight courier service and properly
addressed.
IN WITNESS WHEREOF, the parties have hereunto subscribed on the date
first above-written.
Simond Industries Inc.
By _________________________ ___________________________
Ross B. George Ronald Owens
President Employee
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EXHIBIT 10.8
SIMONDS INDUSTRIES INC.
AMENDED AND RESTATED
1998 STOCK INCENTIVE PLAN
1. NAME AND PURPOSE. This Plan shall be known as the Amended and
Restated Simonds Industries Inc. 1998 Stock Incentive Plan (the "Plan"). This
Plan amends and restates in its entirety the Simonds Industries Inc. 1998 Stock
Incentive Plan dated July 7, 1998. The purpose of the Plan is to advance the
interests of Simonds Industries Inc. (the "Company") by providing material
incentive for the continued services of key and valuable employees and directors
of the Company and its affiliates. Awards under the Plan may be granted in the
form of incentive stock options within the meaning of Section 422 of the
Internal Revenue Code of 1986, as amended or non-qualified stock options.
2. DEFINITIONS. When used herein, the following terms shall have the
meanings provided below:
"Board" shall mean the Board of Directors of the Company.
"Cause" shall have the meaning given such term in the Stockholder
Agreement.
"Code" shall mean the Internal Revenue Code of 1986, as amended from
time to time.
"Committee" shall mean the Compensation Committee of the Board.
"Common Shares" shall mean shares of the Company's common stock, $.01
par value, or such other securities of the Company as may be designated by the
Committee from time to time.
"Company" shall mean Simonds Industries Inc., a Delaware corporation.
"Disability" shall have the meaning given such term in Section
22(e)(3) of the Code.
"Eligible Employee" shall mean an employee of the Company or of any
affiliate, or any non-employee who provides services to the Company or any
affiliate.
"Fair Market Value" of the Common Shares shall mean the market value
as determined by the Committee in its sole discretion, unless the Common Shares
are traded on a national exchange, in which case fair market value for any given
day shall mean the average of the high and low prices of the Common Shares
reported by such applicable exchange on the next preceding trading day.
"Grant Date" shall mean the date any Option is granted and becomes
effective.
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"Incentive Stock Option" shall mean the right to purchase Common
Shares from the Company that is intended to meet the requirements of Section 422
of the Code or any successor provision thereto.
"Initial Public Offering" shall mean an initial public offering of any
class of stock of the Company.
"Liquidity Event" shall mean Approved Sale as defined in Section 5 of
the Stockholder Agreement.
"Management Options" shall mean options with respect to 4,393.75
Common Shares reserved for issuance hereunder awarded to management employees as
provided herein.
"Non-Qualified Stock Option" shall mean a right to purchase Common
Shares from the Company that is not intended to be an Incentive Stock Option.
"Option" shall mean an Incentive Stock Option or a Non-Qualified Stock
Option issued pursuant to the Plan.
"Optionee" shall mean an Eligible Employee who has received an Option
under the Plan.
"Plan" shall mean this Simonds Industries Inc. 1998 Amended and
Restated Stock Incentive Plan.
"Stockholder Agreement" shall mean that certain stockholder agreement
by and among the Company and all of its stockholders dated July 7, 1998, as
amended from time to time.
3. ADMINISTRATION. The Plan shall be administered by the Committee.
The Committee may establish, subject to the provisions of the Plan, such rules
and regulations as it deems necessary for the proper administration of the Plan,
and make such determinations and take such actions in connection therewith or in
relation to the Plan as it deems necessary or advisable, consistent with the
Plan.
4. ELIGIBILITY. Options may be granted to Eligible Employees as
determined by the Committee in its sole discretion, subject to the
recommendations of the Chief Executive Officer of the Company as provided in
Paragraph 6 hereof.
5. SHARES SUBJECT TO THE PLAN.
(a) The Common Shares to be issued and delivered by the Company upon
exercise of Options granted under the Plan may be either authorized but unissued
shares or treasury shares.
(b) The aggregate number of Common Shares of the Company which may be
issued under the Plan shall not exceed 9,361.07 Common Shares; subject, however,
to the adjustment provided in Paragraph 9(b) in the event of certain changes in
the Company's capital structure.
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As of the date hereof, options with respect to 573.58 Common Shares have been
awarded. No Option may be granted under this Plan which could cause such maximum
limit to be exceeded.
(c) Common Shares covered by an Option which is terminated, no longer
exercisable or is otherwise forfeited with respect to such shares shall again be
available for issuance under this Plan.
6. GRANT OF OPTIONS. The Committee may, from time to time, in its sole
discretion, grant Options to Eligible Employees, subject to the terms and
conditions provided herein. Notwithstanding the foregoing, no later than
October 7, 1998, the Committee shall grant the Management Options to management
employees in each amounts as determined by the Committee, subject to the
recommendations of the Chief Executive Officer of the Company.
7. TERMS AND CONDITIONS OF OPTION. Except as otherwise provided by the
Committee in its discretion, all Options granted under the Plan shall be subject
to the foregoing and following limitations and requirements:
(a) OPTION PRICE: The purchase price per share for Common Shares
covered by Options shall be determined by the Committee. Notwithstanding the
foregoing, in the case of an Incentive Stock Option, the purchase price shall
not be less than 100% of the Fair Market Value on the Grant Date (110% in the
case of a 10% stockholder).
(b) TERM OF OPTIONS. Subject to Paragraph 7(f) below, the period of
each Option shall be ten (10) years, unless in the case of any Non-Qualified
Option such term is extended by the Committee in its discretion.
(c) 10% STOCKHOLDER: Notwithstanding any other provision of this Plan,
the purchase price per share of an Incentive Stock Option granted to an Eligible
Employee who, at the time such Option is granted, owns shares possessing more
than 10% of the total combined voting power of all classes of shares of the
Company or its affiliates shall be at least 110% of the Fair Market Value of the
Common Shares subject to the Option as of the date of grant. In addition, any
such Incentive Stock Option may not be exercised after the expiration of five
years from the date the Option is granted.
(d) VESTING OF OPTIONS.
(i) Unless otherwise decided by the Committee, Options shall become
exercisable in three equal installments as follows: one-third on the Grant Date,
one-third on the first anniversary of the Grant Date, and one-third on the
second anniversary of the Grant Date. Unless the Committee decides otherwise, an
Optionee whose employment with the Company and/or its Affiliates terminates for
any reason prior to vesting will forfeit all unvested Options.
(ii) Unless otherwise decided by the Committee, in the event of death
or Disability of the Optionee, or the occurrence of a Liquidity Event while the
Optionee is still employed by the Company and its affiliates, Options shall
become immediately exercisable in full.
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(e) GRANT LIMITATION: The aggregate fair market value of Common Shares
with respect to which Incentive Stock Options are exercisable for the first time
by any Eligible Employee during any calendar year (determined at the time the
Incentive Stock Option is granted) shall not exceed $100,000.
(f) TERMINATION OF OPTIONS BY REASON OF TERMINATION OF EMPLOYMENT:
Unless the Committee decides otherwise, if an Optionee's employment with the
Company and/or its affiliates is terminated by the Company for reasons other
than Cause, all unvested Options shall immediately terminate, and any remaining
Options shall terminate if not exercised before the expiration of 30 days
following such termination of employment, or such earlier time as may be
applicable under Paragraph 7(b) above. If an Optionee's employment with the
Company and/or its affiliates is terminated by reason of death or Disability,
all unvested Options shall become immediately vested, and all Options shall
terminate if not exercised before the expiration of 60 days following the date
of death or termination by reason of Disability, or at such earlier time as may
be applicable under Paragraph 7(b) above. If the Optionee's employment is
terminated for Cause as determined by the Committee in its sole discretion, or
if the Optionee voluntarily terminates employment, all of the Optionee's
Options, including vested Options, shall immediately terminate.
(g) NON-TRANSFERABILITY: Each Option and all rights thereunder shall
be exercisable during the Optionee's lifetime only by him and shall be
non-assignable and non-transferable by the Optionee except, in the event of the
Optionee's death, by will or by the laws of descent and distribution; provided,
however, that in the case of a Non-Qualified Option, such Option may be gifted
to a family member or a trust or partnership for the benefit of a family member.
For purposes of this paragraph, "family member" means a spouse, parent, child,
grandchild, step-child or step-grandchild. In the event the death of an Optionee
occurs, the representative or representatives of the Optionee's estate, or the
person or persons who acquired (by bequest or inheritance) the rights to
exercise the Options may exercise such Options in whole or in part prior to the
expiration of the applicable exercise period, as specified in Paragraphs 7(b)
and 7(f) above.
(h) MORE THAN ONE OPTION GRANTED TO AN OPTIONEE: More than one Option
may be granted to an Optionee under this Plan and both Non-Qualified Options and
Incentive Stock Options may be granted to an Optionee.
(i) COMPLIANCE WITH SECURITIES LAWS: Options granted and shares issued
by the Company upon exercise of Options shall be granted and issued only in full
compliance with all applicable securities laws, including laws, rules and
regulations of the Securities and Exchange Commission and applicable state Blue
Sky Laws. With respect thereto, the Committee may impose such conditions on
transfer, restrictions and limitations as it may deem necessary and appropriate
to assure compliance with such applicable securities laws.
(j) MODIFICATION OR CANCELLATION OF OPTION: The Committee shall have
the authority to effect, at any time and from time to time, with the consent of
the affected Optionee or Optionees, the modification of the terms of any Option
agreement (subject to the limitations hereof),
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including the acceleration of the exercisability of any Option for any reason
including a change in the control or ownership of the Company, a Liquidity
Event, or the cancellation of any or all outstanding Options granted under this
Plan.
(k) DISPOSITION OF SHARES: No Option granted under this Plan shall
qualify as an Incentive Stock Option if the Common Shares acquired pursuant to
the exercise of the Option are transferred, other than by will or by the laws of
descent and distribution, within two years of the date such Option was granted
or within one year after the transfer of Common Shares to the employee pursuant
to such exercise.
8. METHOD OF EXERCISE. An Option granted under this Plan may be
exercised by written notice to the Committee, signed by the Optionee, or by such
other person as is entitled to exercise such Option. The notice of exercise
shall state the number of Common Shares in respect of which the Option is being
exercised, and shall either be accompanied by the payment of the full purchase
price for such shares, or shall fix a date (not more than ten business days from
the date of such notice) for the payment of the full purchase price of the
shares being purchased. The purchase price shall be paid in cash (including
personal check). In addition, as a condition of exercise, the Optionee or such
other person who may be entitled to exercise an Option shall enter into the
Stockholder Agreement or any other applicable stockholder agreement then
existing between the Company and its stockholders. A certificate or certificates
for the Common Shares of the Company purchased through the exercise of an Option
shall be issued in regular course after the exercise of the Option and payment
therefore, and the execution of any applicable stockholders agreement. During
the Option period no person entitled to exercise any Option granted under this
Plan shall have any of the rights or privileges of a stockholder with respect to
any Common Shares issuable upon exercise of such Option until certificates
representing such Common Shares shall have been issued and delivered.
9. CHANGES IN THE COMPANY'S CAPITAL STRUCTURE.
(a) The existence of outstanding Options shall not affect in any way
the right or ability of the Company or its stockholders to make or authorize any
or all adjustments, recapitalizations, reorganizations or other changes in the
Company's capital structure or its business, or any merger or consolidation of
the Company, or any issue of bonds, debentures, common stock, preferred or prior
preference stock ahead of or affecting the Common Shares or the rights hereof,
or the dissolution or liquidation of the Company, or any sale or transfer of all
or any part of its assets or business or substantially all of the outstanding
stock of the Company, or any other corporate act or proceeding, whether of a
similar character or otherwise.
(b) If the Company shall effect a subdivision, consolidation or
reclassification of shares or other capital readjustment or recapitalization,
the payment of a stock dividend, or other increase or reduction of the number of
Common Shares outstanding, without receiving compensation therefor in money,
services or property, then the number, class, and per share price of the Common
Shares covered by Options shall be appropriately adjusted in such a manner as to
entitle an Optionee to receive upon exercise of an Option, for the same
aggregate cash
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consideration, the same total number and class of shares as he would have
received as a result of the event requiring the adjustment.
(c) Upon the occurrence of a Liquidity Event, all outstanding Options
shall become immediately exercisable as provided in Paragraph 7(d)(ii). Unless
the Committee determines otherwise, all outstanding Options shall expire as of
the effective date of such Liquidity Event, provided that (x) notice of such
Liquidity Event shall be given to such Optionee at least 30 days prior to the
effective date thereof, and (y) an Optionee shall have the right to exercise the
Options, after giving effect to the acceleration of vesting described in
Paragraph 7(d)(ii) hereof, during the 30-day period preceding the effective date
of such Liquidity Event, and participate in such Liquidity Event on the same
terms and conditions as other holders of Common Shares as provided in Section
5.1 of the Stockholder Agreement.
(d) In the event of any Initial Public Offering of any class of common
stock of the Company ("IPO Stock") during the term of any outstanding Option,
then the number, class and per share price of Common Shares subject to any
outstanding Option issued pursuant to this Plan shall be appropriately adjusted
in such a manner as to entitle an Optionee to receive upon exercise of such
Option, for the same aggregate cash consideration, shares of IPO Stock which, in
the judgment of the Committee, are substantially equivalent in value to the
Common Shares. Subsequent to the Initial Public Offering, all outstanding
Options may be exercised to the extent vested in whole or in part prior to the
expiration of the applicable exercise period as provided in Paragraphs 7(b) and
7(f) above.
(e) Except as hereinbefore expressly provided, the issue by the
Company of shares of stock of any class, for cash or property, or for labor or
services, either upon direct sale or upon the exercise of rights or warrants to
subscribe therefor, or upon conversion of shares or obligations of the Company
convertible into such shares or other securities, shall not affect, and no
adjustment by reason thereof shall be made with respect to, the number or price
of Common Shares then subject to outstanding Options.
10. AMENDMENT OR TERMINATION. The Committee may terminate this Plan at
any time, and may amend the Plan at any time or from time to time; provided,
however, that any amendment that would increase the aggregate number of Common
Shares that may be issued under the Plan, materially increase the benefits
accruing to employees under the Plan, or materially modify the requirements as
to eligibility for participation in the Plan shall be subject to the approval of
the Company stockholders to the extent required by Code Section 422, other
applicable laws or any other governing rules or regulations except that such
increase or modification that may result from adjustments authorized by
Paragraph 9 does not require such approval. If the Plan is terminated, any
unexercised Option shall continue to be exercisable in accordance with its
terms, except as provided in Paragraph 9(c).
11. COMPANY RESPONSIBILITY. All expenses of this Plan, including the
cost of maintaining records, shall be borne by the Company. The Company shall
have no responsibility
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or liability (other than under applicable securities laws) for any act or thing
done or left undone with respect to the price, time, quantity, or other
conditions and circumstances of the purchase of Common Shares under the terms of
the Plan, so long as the Company acts in good faith.
12. TAX WITHHOLDING. Any grant of an Option hereunder shall provide as
determined by the Committee for appropriate arrangements for the satisfaction by
the Company and the Optionee of all federal, state, local or other income excise
or employment taxes or tax withholding requirements applicable to the exercise
of the Option or the later disposition of the Common Shares thereby acquired and
all such additional taxes or amounts as determined by the Committee in its
discretion, including, without limitation, the right of the Company or any
Affiliate to receive transfers of Common Shares or other property from the
Optionee or to deduct or withhold in the form of shares from any transfer to an
Optionee, in such amount or amounts deemed required or appropriate by the
Committee in its sole and absolute discretion.
13. IMPLIED CONSENT. Every Optionee, by the acceptance of an Option
under this Plan shall be deemed to have consented to be bound, on his own behalf
and on behalf of his heirs, assigns, and legal representatives, by all of the
terms and conditions of this Plan.
14. NO EFFECT ON EMPLOYMENT STATUS. The fact that an employee has been
granted an Option under this Plan shall not limit or otherwise qualify the right
of the Company to terminate such employee's employment at any time.
15. DURATION AND TERMINATION OF THE PLAN. The Plan shall become
effective as of the date hereof. No Incentive Stock Option shall be granted
subsequent to the tenth anniversary of the date hereof, or subsequent to any
earlier date as of which the Plan is terminated pursuant to Paragraph 10.
16. DELAWARE LAW TO GOVERN. This Plan shall be construed and
administered in accordance with and governed by the laws of the State of
Delaware.
IN WITNESS WHEREOF, the Company has caused this Amended and Restated
1998 Stock Incentive Plan to be executed by its duly authorized officer as of
this __ day of August, 1998.
SIMONDS INDUSTRIES INC.
By: _________________________________
Title:____________________________
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EXHIBIT 10.9
ESCROW AGREEMENT
This Escrow Agreement (the "Escrow Agreement") is made and entered into
as of May __, 1995, by and between SI Holding Corporation, a Delaware
corporation (the "Purchaser"), Simonds Industries Inc., a Delaware corporation
(the "Company"), Charles W. Doulton (the "Representative"), Massachusetts
Capital Resource Company ("MCRC"), all the shareholders of Simonds Industries
Inc. (the "Shareholders"), Charles W. Doulton and Paul D. Petricca (the "Option
Holders"), and Fleet Bank of Massachusetts, N.A. (the "Escrow Agent").
RECITALS
A. Pursuant to a certain Stock Purchase Agreement dated May _, 1995
(the "Stock Purchase Agreement"), by and among Purchaser, MCRC, the Option
Holders and the Shareholders and the Company, Purchaser shall acquire one
hundred percent (100%) of the common stock of the Company (the "Acquisition").
The Shareholders, MCRC and the Option Holders are referred to as the
"Indemnifying Parties."
B. The Escrow Agreement is entered into pursuant to, and as a condition
precedent to the closing of the transactions contemplated by, the Stock Purchase
Agreement (the "Closing").
C. Capitalized terms used herein, unless otherwise defined herein,
shall have the meanings assigned to them in the Stock Purchase Agreement.
AGREEMENTS
Accordingly, in consideration of the recitals, and of the respective
agreements and covenants contained herein, and intending to be legally bound
hereby, the parties agree as follows:
ARTICLE I
1.1 INDEMNITY ESCROW FUNDS. At the Closing, and only if the Closing
occurs, Purchaser shall deliver the Indemnity Escrow Funds, totalling Three
Million Two Hundred Fifty Thousand Dollars ($3,250,000) to the Escrow Agent
pursuant to Sections 2.01(i), 3.03(i) and 3.08(i) of the Stock Purchase
Agreement in immediately available funds into an account designated by the
Escrow Agent.
1.1.1 The Indemnity Escrow Funds shall be held by the Escrow
Agent in a separate account (the "Escrow Account") for the benefit of the
Company, the Shareholders, MCRC and the Option Holders, as provided in this
Escrow Agreement.
1.1.2 The Escrow Agent shall maintain for each contributing
Shareholder, MCRC and Option Holder (each, an "Indemnifying Party") an account
(each, an "Indemnifying Party's Account") reflecting (i) such Indemnifying
Party's allocable portion of the Indemnity Escrow Funds hereunder, plus (ii) all
amounts earned on such Indemnifying Party's Account, less
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(iii) the portion of all amounts distributed pursuant hereto as allocated to
such Indemnifying Party's Account, and less (iv) the portion of the Escrow Agent
Fees and Expenses (as hereinafter defined) allocable to such Indemnifying
Party's Account.
1.2 ACCEPTANCE OF APPOINTMENT AS ESCROW AGENT. The Escrow Agent, by
signing this Escrow Agreement, accepts the appointment as Escrow Agent and
agrees to hold and distribute all Indemnity Escrow Funds in accordance with the
terms of this Escrow Agreement.
1.3 DISTRIBUTIONS; INVESTMENTS.
1.3.1 Pending disbursement of the Indemnity Escrow Funds, the
Escrow Agent shall invest such funds in Permitted Investments (as defined
hereinafter). All interest and other income earned on the Indemnity Escrow Funds
shall, until disbursed, constitute part of the Indemnity Escrow Funds and shall,
pending disbursement, be invested in Permitted Investments. For purposes of this
Escrow Agreement, "Permitted Investments" shall mean (i) money market funds
consisting of short-term U.S. Treasury securities, (ii) obligations of or
guaranteed by the United States of America or any agency thereof, either
outright or in connection with repurchase agreements covering such obligations,
or obligations of or guaranteed by any state or political subdivision thereof
with a maturity not less than one (1) year from the date of investment, (iii)
certificates of deposit or bankers' acceptances issued by the Escrow Agent or by
any other national or state-chartered bank having total assets of at least
$500,000,000 with a maturity not later than one (1) year from the date of
investment, and (iv) such other investments as may be specified from time to
time to the Escrow Agent by written instructions from the Representative.
1.3.2 As and when any amount is needed for a payment under
this Escrow Agreement, the Escrow Agent shall cause a sufficient amount of the
Permitted Investments to be converted into cash. Upon the advice and reasonable
consent of the Representative, the Escrow Agent shall select the investments or
types of investments to be so converted.
1.3.3 Notwithstanding any other provision hereof, the Escrow
Agent shall distribute to each of the Indemnifying Parties, on an annual basis
on or before the 15th day of March, an amount equal to forty percent (40%) of
such Indemnifying Party's pro rata gain from the income earned on the Indemnity
Escrow Funds held in the Indemnifying Party's Account for the preceding calendar
year.
1.3.4 For tax purposes, the Indemnity Escrow Funds shall be
property of the Company; however, all interest, dividends and other income
earned on the Indemnity Escrow Funds shall be income of the Indemnifying
Parties, and all parties hereto shall file all Tax Returns consistent with such
treatment.
1.4 DISTRIBUTION OF ESCROW FUNDS TO [INDEMNITEE] INDEMNIFIED PARTYS.
The Escrow Agent shall disburse to the applicable Indemnified Party such portion
of the Indemnity Escrow Funds as may be necessary to pay the Damages, as defined
in Section 2. 1, below, for which the Indemnified Party is entitled to
reimbursement pursuant to Article X of the Stock Purchase Agreement. Any amount
distributed pursuant to this Section 1.4.1 shall be allocated among, and
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deducted from, the Indemnifying Parties' Accounts on a pro rata basis, based
upon a fraction (expressed as a percentage), the numerator of which is equal to
the original dollar amount of each such Indemnifying Party's Account and the
denominator of which is Three Million Two Hundred Fifty Thousand (the
"Indemnifying Party's Percentage"). Any payment to be made pursuant hereto shall
be made not more than thirty (30) days after the first to occur of (i) the
delivery to the Escrow Agent of written instructions signed by the
Representative specifying an amount to be paid from the Escrow Funds to the
Company or (ii) the delivery to the Escrow Agent and the Representative of a
copy of a Final Determination establishing the Indemnified Party's right to
reimbursement under this Escrow Agreement with respect to such Damages. A "Final
Determination" shall mean a final judgment of a court of competent jurisdiction
or an administrative agency having the authority to determine the amount of, and
liability with respect to, the item resulting in Damages for which reimbursement
is sought hereunder and the denial of, or expiration of all rights to, appeal
related thereto.
1.5 SEGREGATION OF THE ESCROW FUNDS.
1.5.1 Notwithstanding any other provision of this Escrow
Agreement to the contrary, the Escrow Agent shall restrict such portion of the
Indemnity Escrow Funds as may be necessary to satisfy in full all Pending Claims
(as hereinafter defined), and shall hold such portion in accordance with this
Section. "Pending Claims" shall mean unresolved Claims that are the subject of
Claim Notices, as hereinafter defined, properly delivered hereunder.
1.5.2 Any portion of the Indemnity Escrow Funds restricted
under Section 1.5.1 shall continue to be restricted by the Escrow Agent until
the Escrow Agent is directed to release such Indemnity Escrow Funds by written
instructions signed by Purchaser and the Representative.
1.6 DISTRIBUTION OF ESCROW FUNDS TO INDEMNIFYING PARTIES. Not
later than the fifth (5th) business day after the Expiration Date, the Escrow
Agent shall distribute to the Indemnifying Parties in accordance with the
Indemnifying Party's Accounts, the remaining Indemnity Escrow Funds minus the
sum of any Indemnity Escrow Funds that are then being restricted with respect to
Pending Claims under Section 1.5.
"Expiration Date" shall mean the date which is THREE (3) YEARS
following the Closing. Any amounts segregated with respect to Pending Claims on
the Expiration Date shall be released as provided in Section 1.5.2 and promptly
thereafter distributed as provided in this Section 1.6.
ARTICLE II
2.1 CLAIMS AGAINST THE ESCROW FUNDS.
2.1.1 From and after the Closing, but subject to the
conditions and limitations set forth in this Escrow Agreement and the Stock
Purchase Agreement, Purchaser and/or Company, and their respective successors
and assigns (collectively, the "Indemnified Parties")
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shall be entitled to reimbursement out of the Indemnity Escrow Funds for any and
all losses, damages, costs, expenses, fines, penalties, settlement payments and
expenses, liabilities, obligations and claims of any kind, including, without
limitation, reasonable attorneys' fees and other legal and professional costs
and expenses (collectively, "Damages") actually incurred or suffered, and paid
to a third party, by an Indemnified Party to the extent resulting from either or
both of the Indemnified Liabilities described in section 10.01(a)(iii) and (iv)
of the Stock Purchase Agreement [collectively, the "Claims"]; provided, however,
Indemnified Parties shall not be entitled to reimbursement out of Indemnity
Escrow Funds unless and until Indemnified Parties' Damages exceed $100,000, as
more fully provided in Section 10.01(b) of the Stock Purchase Agreement, in
which event the Indemnified Parties will be entitled to make a Claim to the
extent of such excess. The aggregate of all Claims paid hereunder shall not
exceed Three Million Two Hundred Fifty Thousand Dollars ($3,250,000).
2.1.2 In calculating any Damage payable pursuant to Section
2.1.1, any amount payable shall be reduced by the amount of any insurance or
third party recoveries of any Indemnified Party less any costs, expenses
allocable portions of premiums or taxes incurred in connection therewith.
2.2 NOTICE OF CLAIMS; OTHER PROCEDURES.
2.2.1 In the event that any action, claim or demand is
asserted against or sought to be collected from any Indemnified Party for which
the Indemnified Party intends to assert a right of reimbursement from the
Indemnity Escrow Funds, such Indemnified Party shall notify the Representative
and the Escrow Agent with reasonable promptness of such Claim, prior to the
Expiration Date, specifying, to the extent known, the nature, circumstances and
the amount of such Claim (a "Claim Notice"). The Representative shall have
thirty (30) days from his receipt of a Claim Notice (the "Claim Notice Period")
to notify Indemnified Parties and the Escrow Agent (i) that the Representative
disputes the Indemnified Party's right of reimbursement from the Escrow Funds
with respect to such Claim, or (ii) that the Representative does not dispute
such right of reimbursement. No timely response from the Representative shall be
deemed to be a dispute of a Claim.
2.2.2 If the Representative notifies the Indemnified Party and
the Escrow Agent within the Claim Notice Period that the Representative does not
dispute the Indemnified Party's right of reimbursement, the Indemnified Party
may proceed to pay, defend or settle the Claim, in its reasonable discretion,
and the Representative shall promptly reimburse such Damages. The Representative
may participate in, but not control, any defense or settlement, at his sole cost
and expense.
2.2.3 If the Representative disputes the Indemnified Party's
right of reimbursement with respect to a Claim, the parties shall attempt in
good faith to resolve the issue amicably and fairly. Failing amicable private
resolution, the matter shall be resolved by way of binding arbitration in
Boston, Massachusetts, pursuant to the Commercial Rules of Arbitration of the
American Arbitration Association. Unless the Representative has timely disputed
the Indemnified Party's right to reimbursement for a Claim, Indemnified Party
shall be entitled to
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reimbursement out of Indemnity Escrow Funds for such defense. If the
Representative disputes a Claim, he may still participate in, but not control,
the defense or settlement of such Claim at the Representative's sole cost and
expense.
2.3 SURVIVAL OF CLAIMS. Any claim for reimbursement from the
Indemnity Escrow Funds that is not asserted in accordance herewith prior to
5:00 p.m. (E.S.T.) on the Expiration Date may not be pursued and shall be
irrevocably waived.
ARTICLE III
3.1 APPOINTMENT OF REPRESENTATIVE.
3.1.1 The Representative, Charles W. Doulton, is hereby
appointed, pursuant to the Stock Purchase Agreement, as agent and representative
of the Indemnifying Partys as of the Closing Date. The Representative is hereby
authorized and empowered by the Indemnifying Parties to perform the obligations
and exercise the rights of the Representative as set forth in this Escrow
Agreement and the Stock Purchase Agreement and agrees to abide by the terms and
provisions of this Escrow Agreement and the Stock Purchase Agreement. Upon the
resignation of Charles W. Doulton, whether by death, disability or otherwise, he
shall be replaced by Robert P. Henderson. Upon the resignation of Robert P.
Henderson, he shall be replaced by the affirmative vote of seventy-five percent
(75 %) or more of the total number of Indemnifying Parties. Any person who
becomes a replacement Representative shall execute a counterpart of this Escrow
Agreement to evidence his/her agreement with the terms and conditions of this
Escrow Agreement.
3.1.2 The Representative shall, after the Closing, (i) receive
all information and notices required under the Stock Purchase Agreement and this
Escrow Agreement on behalf of the Indemnifying Parties and copy each
Indemnifying Party on all notices or correspondence from or to any Indemnified
Party; (ii) take, on behalf of the Indemnifying Parties, any action he may deem
appropriate with respect to any dispute arising out of or relating to the Stock
Purchase Agreement or this Escrow Agreement; and (iii) execute and deliver all
instruments and documents of every kind incident to the foregoing.
3.1.3 The Representative may confer with counsel with respect
to any question relating to his duties or responsibilities under the Stock
Purchase Agreement or this Escrow Agreement. The Representative shall not be
liable or responsible for anything done or omitted to be done by him in good
faith or on the advice of counsel.
3.1.4 The Representative shall be paid no fee for his services
under this Escrow Agreement, but he shall be entitled to reimbursement for
reasonable expenses (including the reasonable fees and disbursements of his
counsel) actually incurred by the Representative in connection with his duties
under this Escrow Agreement (collectively, the "Representative Fees and
Expenses"). All Representative Fees and Expenses shall be paid first out of
interest, dividends, and other income earned on the Escrow Funds and then, to
the extent of any shortfall, pro rata, by the Indemnifying Parties.
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ARTICLE IV
4.1 RIGHTS AND RESPONSIBILITIES OF THE ESCROW AGENT.
4.1.1 The duties and responsibilities of the Escrow Agent
shall be limited to those expressly set forth in this Escrow Agreement, and it
shall not be subject to, nor obligated to recognize, any other agreement
between, or direction or instruction of, any or all of the parties to this
Escrow Agreement.
4.1.2 If any Indemnity Escrow Funds are at any time attached,
garnished or levied upon under any court order or in case the payment of any
such Indemnity Escrow Funds shall be stayed or enjoined by any court order, or
in case any order, judgment or decree shall be made or entered by any court
affecting such Indemnity Escrow Funds or any part thereof, then and in any of
such events, the Escrow Agent is authorized, in its sole discretion, to rely
upon and comply with any such order, writ, judgment or decree which it is
advised by legal counsel is binding upon it. If the Escrow Agent complies with
any such order, writ, judgment or decree, it shall not be liable to any of the
parties to this Escrow Agreement or to any other person by reason of such
compliance even though such order, writ, judgment or decree may be subsequently
reversed, modified, annulled, set aside or vacated.
4.1.3 The Escrow Agent shall not be liable for any act taken
or omitted under this Escrow Agreement if taken, or omitted by it in good faith
and in the exercise of reasonable care under the circumstances. The Escrow Agent
shall also be fully protected in relying upon any written notice, demand,
certificate or document which it in good faith believes to be genuine.
4.1.4 The Escrow Agent, and any successor Escrow Agent, may
resign at any time as Escrow Agent hereunder by giving at least thirty (30) days
written notice to the Company, the Representative and each Indemnified Party.
Upon such resignation and the appointment of a successor Escrow Agent, the
resigning Escrow Agent shall be absolved from any and all liability in
connection with the exercise of its powers and duties as Escrow Agent hereunder
except for liability arising in connection with its negligence or willful
misconduct. Upon their receipt of notice of resignation from the Escrow Agent,
the Company, the Representative and each Indemnified Party shall use reasonable
efforts jointly to designate a successor Escrow Agent. In the event such parties
do not agree upon a successor Escrow Agent within thirty (30) days after the
receipt of such notice, the Escrow Agent so resigning may petition any court of
competent jurisdiction for the appointment of a successor Escrow Agent or other
appropriate relief and any such resulting appointment shall be binding upon all
parties hereto. By mutual agreement, the Company, the Representative and each
Indemnified Party shall have the right at any time upon not less than ten (10)
days' prior written notice to the Escrow Agent to terminate their appointment of
the Escrow Agent, or successor Escrow Agent, as Escrow Agent. The Escrow Agent
or successor Escrow Agent shall continue to act as Escrow Agent until a
successor is appointed and qualified to act as Escrow Agent.
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4.2 FEES AND EXPENSES OF ESCROW AGENT.
4.2.1 The Escrow Agent shall (a) be paid a fee for its
services under this Escrow Agreement as provided by Exhibit A and (b) be
entitled to reimbursement for reasonable expenses (including the reasonable fees
and disbursements of its counsel) actually incurred by the Escrow Agent in
connection with its duties under this Escrow Agreement (collectively, the
"Escrow Agent Fees and Expenses"). All Escrow Agent Fees and Expenses shall be
paid first out of interest, dividends, and other income earned on the Escrow
Funds and then, to the extent of any shortfall, pro rata, by the Indemnifying
Parties.
ARTICLE V
5.1 NOTICES. All notices, requests, consents or other communications
required or permitted under this Escrow Agreement shall be in writing and shall
be deemed to have been duly given or delivered by any party (a) when received by
such party if delivered by hand, (b) upon confirmation when delivered by
telecopy, (c) within one day after being sent by recognized overnight delivery
service, or (d) within three business days after being mailed by first-class
mail, postage prepaid, and in each case addressed as follows:
(i) if to Buyers or to any Indemnified Party:
SI Holding Corporation
c/o Fleet Venture Resources, Inc.
111 Westminster Street
Providence, RI 02903
Attention: Mr. Habib Y. Gorgi, Executive Vice President
with a copy to:
Hinckley, Allen & Snyder
1500 Fleet Center
Providence, RI 02903
Attention: Mr. Richard G. Small, Esq.
(ii) if to the Indemnifying Parties or the Representative, to:
Charles W. Doulton
Players' Club, Unit 106D
1425 Gulf of Mexico Drive
Longboat Key, FL 34228
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with a copy to:
Chmielinski, Wilchins & Witman, P.A.
36 Washington Street, Suite 70-90
Wellesley Hills, MA 02181-1904
Attention: David P. Witman, Esq.
(iii) if to the Escrow Agent, to:
Fleet Bank of Massachusetts, N.A.
Trust Department
28 State Street
Boston, MA 02110
Attention: Timothy Donmoyer
Any party by written notice to the other parties pursuant to this
Section may change the address or the persons to whom notices or copies thereof
shall be directed.
5.2 ASSIGNMENT. This Escrow Agreement and the rights and duties
hereunder shall be binding upon and inure to the benefit of the parties hereto
and the successors and assigns of each of the parties to this Escrow Agreement.
No rights, obligations or liabilities hereunder shall be assignable by any party
without the prior written consent of the other parties, except that any
Indemnified Party may assign its rights under this Escrow Agreement without
obtaining the prior written consent of the other parties hereto to any person
who acquires (whether in a single transaction or a series of related
transactions) (i) all or substantially all of the assets of any such Indemnified
Party or (ii) a majority of the outstanding capital stock of any such
Indemnified Party. Notwithstanding the foregoing, any Indemnified Party may make
a collateral assignment of its rights under this Agreement to any institutional
lender who provides funds to any such Indemnified Party for the consummation of
the Acquisition. Representative agrees to execute acknowledgments of such
assignment(s) and collateral assignments in such forms as such Indemnified
Party's institutional lender(s) may from time to time reasonably request.
5.3 AMENDMENT. This Escrow Agreement may be amended or modified only by
an instrument in writing duly executed by all the parties to this Escrow
Agreement.
5.4 WAIVERS. Any waiver by any party hereto of any breach of or failure
to comply with any provision of this Escrow Agreement by any other party hereto
shall be in writing and shall not be construed as, or constitute, a continuing
waiver of such provision, or a waiver of any other breach of, or failure to
comply with, any other provision of this Escrow Agreement.
5.5 CONSTRUCTION. This Escrow Agreement shall be construed and enforced
in accordance with and governed by the internal substantive laws of the
Commonwealth of Massachusetts. The headings in this Escrow Agreement are solely
for convenience of reference and shall not be given any effect in the
construction or interpretation of this Escrow Agreement.
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Unless otherwise stated, references to Sections and Exhibits are references to
Sections and Exhibits of this Escrow Agreement.
5.6 THIRD PARTIES. Nothing expressed or implied in this Escrow
Agreement is intended, or shall be construed, to confer upon or give any person
or entity other than the Indemnified Parties, the Representative, the
Indemnifying Parties and the Escrow Agent any rights or remedies under, or by
reason of, this Escrow Agreement.
5.7 TERMINATION. This Escrow Agreement shall terminate at the time of
the final distribution by the Escrow Agent of all Escrow Funds in accordance
with the provisions of this Escrow Agreement.
5.8 COUNTERPARTS. This Escrow Agreement may be executed in one or more
counterparts, each of which shall be deemed any original and all of which
together shall constitute a single instrument.
5.9 WAIVER OF OFFSET RIGHTS. The Escrow Agent hereby waives any and all
rights to offset that it may have against the Escrow Funds including, without
limitation, claims arising as a result of any claims, amounts, liabilities,
costs, expenses, damages, or other losses that the Escrow Agent may be otherwise
entitled to collect from any party to this Agreement or any [Indemnitor]
Indemnifying Party.
IN WITNESS WHEREOF, the parties hereto have caused this Escrow
Agreement to be executed by their duly authorized officers as of the day and
year first above written.
PURCHASER:
SI Holding Corporation
By:_______________________________
Habib Y. Gorgi
Executive Vice President
COMPANY:
Simonds Industries Inc.
By:_______________________________
Ross B. George
President
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REPRESENTATIVE:
__________________________________
Charles W. Doulton
OPTION HOLDERS:
__________________________________
Charles W. Doulton
__________________________________
Paul D. Petricca
MASSACHUSETTS CAPITAL RESOURCE COMPANY, INC.
By:_______________________________
Richard Anderson
Vice President
ESCROW AGENT:
Fleet Bank of Massachusetts, N.A.
By:_______________________________
Name:
Title:
SHAREHOLDERS:
Greylock Capital Limited Partnership
By:_______________________________
Robert P. Henderson
Managing Partner
Greylock Investment Limited Partnership
By:_______________________________
Robert P. Henderson
General Partner
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Doulton Children's Trust, FOB Kara
By:_______________________________
Priscilla A. Doulton
as Trustee
__________________________________
Charles W. Doulton
__________________________________
Priscilla A. Doulton
__________________________________
Bettina E. Doulton
__________________________________
Ross B. George
__________________________________
Mildred George
__________________________________
Joseph L. Sylvia
__________________________________
Robert W. Deedrick
__________________________________
Harry H. Rogers
__________________________________
Brian Loveridge
Norval Morey Family Trust,
By:_______________________________
Norval Morey,
as Trustee
__________________________________
John E. Halloran
__________________________________
Charles C. Lundstrom
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<PAGE> 1
Exhibit 10.10
THIS AGREEMENT DATED MAY 5, 1997, IS BETWEEN SIMONDS INDUSTRIES INC., AND/OR ITS
SUCCESSORS, FOR ITS PLANT LOCATED AT FITCHBURG, MASSACHUSETTS (HEREINAFTER
REFERRED TO AS THE "COMPANY") AND UNITED STEELWORKERS OF AMERICA, AFL-CIO,
AND/OR ITS SUCCESSORS, ON BEHALF OF LOCAL 7896 (HEREINAFTER REFERRED TO AS THE
"UNION").
ARTICLE I
RECOGNITION
The Company recognizes the Union as the sole and exclusive collective-bargaining
representative for all production and maintenance employees in the bargaining
unit as determined by the National Labor Relations Board in case No. I-RC-11519
with respect to rates of pay, wages, hours of employment and other conditions of
employment.
ARTICLE II
PURPOSE AND INTENT
The purpose of the Company and the Union in entering into this Labor Agreement
is to set forth their agreement on rates of pay, wages, hours of work, and other
conditions of employment so as to promote orderly and peaceful relations with
the employees, to achieve uninterrupted operation in the plant, and to achieve
the highest level of employee performance consistent with safety, good health,
and sustained effort.
The Company and the Union encourage the highest possible degree of friendly,
cooperative relationships between their respective representatives at all levels
and with and between all employees. The officers of the Company and the Union
realize that this goal depends on more than words in a labor agreement, that it
depends primarily on attitudes between people in their respective organization
and at all levels of responsibility. They believe that proper attitudes must be
based on full understanding and regard for the respective rights and
responsibilities of both the company and the Union. They believe also that
proper attitudes are of major importance in the plant where day-to-day
operations and administration of this Agreement demand fairness and
understanding. They believe that these attitudes can be encouraged best when it
is made clear that the Company and Union officials, whose duties involved
negotiation of this Agreement, are not anti-union or anti-company but are
sincerely concerned with the best interests and well being of the business of
all employees.
ARTICLE III
MANAGEMENT RESPONSIBILITY
Subject to the provisions of this Labor Agreement, the Company retains the
exclusive rights to manage the business and the plant and to direct the working
forces. The Company, in the exercise of its rights, shall observe the provisions
of the Agreement.
The rights to manage the business and plant and to direct the working forces
include but are not limited to the right to hire, suspend or discharge for
proper cause, or to transfer, and the right to relieve employees from duty
because of lack of work or for other legitimate reasons.
<PAGE> 2
ARTICLE IV
SUPERVISORS WORKING
A supervisor shall act in a supervisory capacity and shall not perform the work
regularly performed by bargaining unit employees. However, this provision shall
not be deemed to prohibit a supervisor from performing the work of bargaining
unit employees in emergency situations, in situations where an employee
encounters difficulty in the performance of his work, or in situations where he
is instructing employees in the use of tools or in the methods of performing
work. Nor shall a supervisor or engineering or laboratory personnel be
prohibited from performing experimental work, special mechanical work or other
research work considered necessary by the Company for the improvement of its
products or of its manufacturing methods.
ARTICLE V
UNION SECURITY
A. MEMBERSHIP IN UNION
(1) As a condition of employment, all employees covered by this Agreement,
as defined in Article I (in case of new employees, ninety (90) days
after the date of hiring and subsequent to the effective date of this
Agreement) shall become and remain members of the Union to the extent
of paying or tendering initiation fees and membership dues uniformly
levied against all members during the term of this Agreement.
(2) The Union may not discriminate against applicants for membership in
the Union and the requirements of membership in the Union as a
condition of employment shall be considered fulfilled by the payment
or tender of payment of initiation fees and membership dues uniformly
levied against all members.
(3) Any employee who fails to maintain his obligations under the
provisions of the Article shall not be retained in the employ of the
Company, provided that the Union shall have notified the Company and
the employee in writing of such default, and said employee shall have
failed to remedy the same within thirty (30) days after receipt of
such notice.
(4) The provisions of this Article shall not apply to any employee in the
bargaining unit to whom membership in the Union is denied or whose
membership therein has been terminated for reasons other than the
failure of such employee to tender the initiation fees and membership
dues uniformly levied against all members.
(5) Application for membership form shall be as agreed to in writing by
the Company and Union.
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(6) The Union will furnish the Company with the names of all members
paying dues directly to the Union within sixty (60) days following the
effective date of this Agreement, and each thirty (30) days thereafter
during the term thereof.
(7) Any disputes arising as to an employee's membership in, or tender or
payment of membership dues to the Union shall be a subject for the
grievance procedure, including arbitration.
B. CHECKOFF
(1) The Company will check off monthly dues, assessments and initiation
fees each as designated by the International Treasurer of the Union,
as membership dues in the Union, on the basis of individually signed
voluntary checkoff authorization cards in forms agreed to by the
Company and the Union. The monthly membership dues for each employee
who has provided a voluntary checkoff authorization card shall be an
amount equal to 1.3% of said members total earnings during the month
provided that monthly dues shall not be less than $5.00 and provided
further that monthly dues shall not be more than 2.5 times the
member's average hourly earnings.
(2) Deductions on the basis of authorization cards submitted to the
company shall commence with respect to dues for the month in which the
Company receives such authorization card or in which such card becomes
effective, whichever is later. Dues for a given month shall be
deducted from the second pay closed and calculated in the succeeding
month.
(3) In cases of earnings insufficient to cover deduction of dues, the dues
shall be deducted from the next pay in which there are sufficient
earnings, or a double deduction may be made from the second pay of the
following month, provided, however, that the accumulation of dues
shall be limited to two months. The International Treasurer of the
Union shall be provided with a list of those employees for whom double
deduction has been made.
(4) The Union will be notified of the reason for nontransmission of dues
in case of layoff, discharge, resignation, leave of absence, sick
leave, retirement, death, insufficient earnings.
(5) Unless the Company is otherwise notified, the only Union membership
dues to be deducted for payment to the Union from the pay of the
employee who has finished. an authorization shall be monthly Union
dues. With respect to check off authorization cards submitted directly
to the Company, the Company will deduct initiation fees unless
specifically requested not to do so by the International Treasurer of
the Union after such checkoff authorization cards have become
effective. The International Treasurer of the Union shall be provided
with a list of
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those employees for whom initiation fees have been deducted under
this paragraph.
(6) Dues deducted by the Company in accordance with the foregoing shall be
remitted to the International Union Treasurer on a monthly basis.
C. SAVINGS CLAUSES
The provisions of this Section and of the cards for membership application and
dues checkoff shall be effective in accordance and consistent with applicable
provisions of Federal Law.
The Union shall indemnify and save the Company harmless against any and all
claims, demands, suits, or other forms of liability that shall arise out of or
by reason of action taken or not taken by the Company for the purpose of
complying with any of the provisions of this Section, or in reliance of any
list, notice or assignment furnished under any of such provisions.
ARTICLE VI
HOURS OF WORK
SECTION 1 - SCOPE
This section defines the normal hours of work and shall not be construed as a
guarantee of hours of work per day or per week, or days of work per week.
SECTION 2
(a) The normal work week for employees covered by this Agreement shall be
forty (40) hours per week eight (8) consecutive per day, not including
any unpaid meal, but including one 10 minute break and two 5 minute
wash-up periods (before lunch and before the end of the shifts), five
(5) days per week, Monday to Friday, inclusive. In the event of a
reduction of hours from the normal work week for (4) consecutive
weeks, then the junior employee in the classification will be laid off
from that affected position, so as to provide (40) hours of work for
the senior employee.
(b) The normal work day is the 24-hour period beginning with the regularly
assigned starting time of the work shift. The work week starts with
the regularly assigned work shift on Monday except for employees who
are assigned to the third shift, whose work week begins on Sunday
night.
(c) Determination of the starting times shall be made by the company and
schedules may be changed by the Company from time to time to suit
varying conditions of the business; provided however, that
indiscriminate changes shall not be made in such schedules and
provided further that changes deemed necessary by the
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<PAGE> 5
Company shall be discussed with the plant representatives of the Union
prior to the change and as far in advance of such changes as is
possible.
Notice of Saturday and Sunday overtime work shall be given before the work
period ends on Thursday. The third shift notification will be given when
feasible by 7:00 A.M. Thursday morning on a tentative basis.
SECTION 3
(a) All hours worked in excess of eight (8) in any one day and all hours
worked on Saturday shall be paid for at the rate of time and one-half
(1-1/2).
(b) All hours worked on Sunday will be paid for at the rate of double time
except for employees who are assigned to third shift, whose work week
begins at 10:30 P.M. or 11:00 P.M. on Sunday.
(c) All hours worked in excess of forty (40) in any work week will be paid
for at the rate of time and one-half (1-1/2).
(d) Time and one-half (1-1/2) shall be paid for hours worked on Company
paid holidays set forth in Article XVI of this Agreement plus holiday
pay.
(e) 1. Anyone called in prior to his scheduled starting time shall be
paid time and one-half (1-1/2) for hours worked prior to his
starting time.
2. An employee called in and who reports to work shall be guaranteed
four (4) hours pay at the applicable rate for that day.
3. Any employee who without prior notice from the Company not to do
so, reports for work and finds his regular work not available
shall be given not less than four (4) hours work and shall be
compensated at his standard hourly wage rate. If such work is not
available, he shall receive four (4) hours pay at his standard
hourly wage rate, provided, however, that this provision shall
not apply if:
(a) an employee has been absent and returns to work without
having notified his foreman at least twelve (12) hours prior
to his scheduled starting time as to when he will return to
work, or
(b) a breakdown or suspension of operations occurs because of
lack of power, act of God, fire, flood, or other cause
beyond the Company's control.
4. If an employee cannot report for his/her scheduled shift, the
Company must be notified at least ten (10) minutes prior to the
start of the shift
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unless a legitimate reason exists preventing the employee from
giving such notification. Appropriate voice mail phone numbers
will be posted.
SECTION 4
There shall be no duplication or pyramiding of overtime or premium rates of pay
so that when the particular work falls within two or more overtime or other
premium classifications, either under this Agreement or as a matter of law, only
the single highest applicable overtime or other premium rate shall be paid.
SECTION 5
(a) The Company may require an employee to work a reasonable amount
of overtime in accordance with operational requirements.
Employees will be expected to meet overtime schedules when given
a reasonable notice.
(b) Consistent with operating requirements and efficiency, overtime
shall be distributed reasonably equitably among those employees
within the department in the job classification where the
overtime is involved, providing the employees are qualified to do
the work, and among those that do not have a high absentee
record. If there is an insufficient number of employees who
regularly hold the classification to fulfill overtime
requirements, then the overtime will be distributed reasonably
equitably among the other qualified employees in the department.
Records maintained by the Foreman on distribution of overtime
will be available to the area representative upon request. Line
supervisors will update overtime records on a weekly basis. This
record will show assigned job code and will be made available to
the area Union representative upon request.
The Company and the Union agree that when the Company determines that an
employee is absent to the extent where it will affect whether or not the
employee is scheduled for overtime, the Company will notify the employee that
the Company has determined that absenteeism is becoming excessive and that
further absences (whether full days or partial days and regardless of a doctor'
s excuse) in future weeks will cause the employee not to be scheduled for
overtime for which he would normally be scheduled.
Such notice shall be verbally given with a memo to the file. The Union and the
employee may obtain copy of this note upon request.
(c) The remedy for improper distribution of overtime shall be the
granting of future available overtime work and shall not be pay
for unworked time.
(d) Notice of Saturday and Sunday overtime work shall be given before
the work period ends on Thursday; the third shift notification
will be given at the beginning of the shift on Thursday night.
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SECTION 6 - INVENTORY WORK
The Company shall have the right to assign as many employees from a particular
department to perform inventory work in that department.
Should employees be needed to perform inventory work in a particular department
in addition to those employees from that department, the Company will offer the
work to employees in departments other than the particular department in
accordance with seniority. If not enough employees are willing to perform such
work, the Company will have the right to assign employees to perform the work in
reverse order of seniority.
Employees performing inventory work will be paid at their current job rate.
SECTION 7 - TRAVEL TIME
In order to clarify the policy with regard to payment to Bargaining Unit
employees traveling on special assignment, we have prepared the rules shown
below.
1 Employees will be paid for travel time to and from the location of the
special assignment. Travel time will be measured from the residence or from
the normal work location should the employee leave from there.
2. Travel time which occurs during the employee's normal workday will be paid
at the appropriate CWS rate in each case.
3. Travel time which occurs during times other than the employee's normal
workday and between workdays (Saturday and Sunday) will be paid at base
rate. The usual provisions for time and one-half and double time will apply
to travel time outside the normal workday.
4. Travel time will only be paid when other than the normal work day is
involved or when the assignment and travel time combined exceed eight hours
during the normal work day.
ARTICLE VII
SENIORITY
The parties recognize that promotional opportunity and job security in event of
promotions, decrease in forces, and recalls after layoffs should increase in
proportion of length of continuous service, and that in the administration of
this Article the intent will be that wherever practical full consideration shall
be given continuous service in such cases.
1. It is understood and agreed that in all cases of:
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(A) Promotion, the following factors as listed below shall be considered;
however, only where factors 1 and 2 are relatively equal shall length
of continuous service be the determining factor:
1. Ability to perform the work,
2. Physical fitness,
3. Continuous service.
(B) Decrease in forces or recalls after layoffs the following factors as
listed below shall be considered; however, only where both factors 1
and 2 are relatively equal shall continuous service be the determining
factor:
1. Ability to perform the work,
2. Physical fitness,
3. Continuous service.
(C) Seniority is defined as the length of an employee's continuous service
at Simonds Industries Inc., Fitchburg, Massachusetts, from his latest
effective date of employment or re employment as measured in years,
months, and days. However, it is understood by both parties that any
employee who, prior to this Agreement transferred to Fitchburg from
another location of the Company, has been credited with continuous
service for the time worked at such other Company location from his
latest effective date or employment or re-employment. In those
instances where two or more employees have the same date of hire,
seniority will be determined by clock number, the lower number having
the greater length of service. The Company agrees that for the purpose
of bidding, bumping, and vacation accrual, service with Simonds
Cutting Tools shall be recognized for those Simonds Cutting Tools
employees who were hired at the time of the transfer of assets to
Simonds Industries.
(D) Seniority shall be applied in individual departments which are listed
in Exhibit B. Revision of such list of departments, which is for
seniority purposes only, shall be subject to the grievance procedure.
(E) There is a 90-day probationary period for all new employees. There is
no seniority during the probation period. A new employee who is
retained in employment after the end of his probationary period will
have seniority effective as of his first day of work. Absences for any
reason considered to be excessive, will be added to the 90-day
probationary period. The Company has sole discretion to dismiss a
probationary employee and such dismissal shall not be subject to the
grievance procedure.
II. When a reduction of forces is made the following applies:
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(A) On jobs which traditionally are plant-wide in nature such as anvil
men, maintenance trades, etc. and on special skill jobs as listed
below, employees shall be removed from the job classification in
reverse order of seniority. The least senior employee in the
classification may, if he had previously been qualified in another
classification, bump into that classification provided he has the
seniority and provided he can requalify with minimal training (1 week
or less), or he may displace an employee in the list of designated
pool jobs. (Exhibit F).
Special Skill Jobs: E.D.M. Operator
Anvil Man - Specialty
Anvil Man - Metal Saws
E.B. Welder
Q.C. Technician
(B) In the case of a reduction in work force, an employee being laid off
from his incumbent job will have, in addition to his/her normal
bumping rights, under Section (C), the option to displace the least
senior active employee in the same grade within his/her group as
stipulated below. If that employee does not exercise this option, only
the employee he bumps will have this additional option. If an employee
exercises this option, the company will provide the normal training
time for he/she to learn the new job. Skilled craft and special skill
jobs are exempt from bump under this paragraph.
Lines will be grouped as follows for the purpose of implementing this
option.
Line 8
Lines 4, 10, 11, 12, 13, 16, 18, 19, 26 & 39
Lines 42, 43, 45, 46, 47, 48, 49, 56 & 80
(C) Employees working on jobs in departments shown in Exhibit B shall be
removed from the department in the reverse order of seniority. An
employee who is laid off from his department may exercise his
seniority as follows. Under the following options numbered 1, 2, and
4, the laid off employee will always displace the least senior
employee. However, if an 11-7 shift is operating for the bumped
position, the laid off employee will be allowed to exercise shift
seniority. If this results in the displacement of any employee, said
employee will be assigned by supervision to another shift.
1. He may displace a less senior employee whose job he previously
performed, provided he can requalify with minimal training (one
week or less), or
2. He may displace a less senior employee occupying a job which is
related in management's opinion, provided he can qualify with
minimal training of one week or less, or
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3. He may displace the least senior employee in his department
provided he can qualify with minimal training in one week or
less, or:
4. He may displace an employee in the list of designated pool jobs.
(Exhibit F).
5. In lieu of lay-off employees having ten (10) or more years of
service, may displace the least senior employee in the plant.
However, in the event of a permanent elimination of a bargaining
unit job or the phase out of a job within the Fitchburg facility,
subsequent to the decision to eliminate a manufacturing line, an
affected employee will not be required to meet the ten (10) year
provision. This section will only be used as a final option and
excludes displacing skilled trades or special skilled jobs as
defined in the agreement.
6. Employees can be given an extension of training time up to a
maximum of five (5) days if reasonable progress is being shown on
the new job.
7. Junior employees who cannot exercise any of the above options
will be given five days notice of layoff whenever practical.
8. Any employee who is affected by a reduction in force may elect
lay-off status rather than exercise his seniority to displace
another employee. An employee making such election shall have
recall rights limited to the job from which he was laid off,
provided, that he may reinstate his general recall rights by so
notifying the Personnel Department in writing, in which case he
must await his turn for recall in order of seniority.
9. A non-probationary employee who has been placed on lay-off from
their incumbent job and who has exercised his/her seniority
rights, will not lose recall rights to their incumbent job if
they refuse recall to a job held after their lay-off from their
incumbent position. However, recall rights will be lost to
specific job he/she was recalled to.
10. It is understood that most employees when faced with exercising
bumping rights will select their options immediately. Those
employees who cannot decide immediately will be given 48 hours to
do so; they will be notified after the first 24 hours that they
must decide within the remaining 24 hour period.
11. An employee must promptly report any change of address in writing
to the Personnel Office and the Company shall be entitled to use
the last address shown on its records in sending notices or
letters.
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12. Temporary lay-offs for a period of not more than five (5) working
days shall not be subject to the provisions of this article.
13. Any employee promoted to a position outside of the bargaining
unit as defined in Article I shall have a period of twelve (12)
months during which he may return to the bargaining unit with
full credit for his seniority. Thereafter he would start as a new
employee if returned to the bargaining unit.
14. Seniority is terminated by any one of the following occurrences:
(A) Quitting
Note: Voluntary termination shall be in writing no later
than 24 hours of such action. Employees agreeing to this
will sign and date with the Union President or agreed
designee as a signed witness. Employees who fail to report
for their next scheduled shift or 24 hours, whichever is
longer, after having voluntarily left their job shall be
deemed voluntary quits.
(B) Discharge
(C) Failure to report to work following expiration of vacation
or leave of absence unless such failure to report is for a
legitimate reason.
(D) Failure to report to work after a layoff within 72 hours of
his being notified by a registered letter or telegram sent
to the employee's last address of record unless prevented by
sickness or some other legitimate reason. In the event the
employee is working elsewhere at the time of recall, he must
give notice to the Company within 72 hours of his intention
to return to work and must report for work within ten (10)
days of his notice of recall.
(E) When an individual on lay off is recalled to a temporary
position the following procedure will apply:
1. An individual may refuse recall to a temporary position
without jeopardizing seniority if there is a valid
reason involved.
2. When an individual is recalled to a temporary position,
said employee must remain on the temporary position
until the assignment is completed. If a less senior
employee is recalled to a permanent position that would
have been offered to the employee holding the temporary
position, upon completion, may exercise his/her normal
bumping
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rights. If said employee who was temporarily recalled
has no options under the normal bumping procedure he or
she may bump the most junior permanently recalled
employee whose job said temporary employee would have
been offered if not temporarily recalled.
3. As a last alternative a senior employee may bump a
junior employee recalled to a temporary position
provided he/she can perform the job in five days or
less.
This condition will be explained to employees recalled to
temporary positions.
(F) Absence because of sickness for a period exceeding two (2)
years. Absence due to compensable disability incurred during
the course of employment shall not terminate seniority
provided such individual returns to work within ten (10)
calendar days following the judgment of a one time
compensation settlement. Said employee must be medically
cleared to return to their incumbent job.
(G) Lay-off for a period as shown below (upon completion of the
probationary period):
Up to 1 Year Service 12 months
1 - 2 Years of Service 24 months
2 Years and Over 30 months
Note: (Employees of record as of the date of this labor
agreement will retain (30) months of recall rights.)
15. When there is a decrease of forces, top seniority shall be
recognized to employees then holding the following Union offices:
President
Vice-President
Recording Secretary
Financial Secretary
Treasurer
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and four (4) Grievance Committeemen, provided however, they have
completed two (2) or more years of continuous service with the
Company and provided further they are competent to perform the
remaining work to be done in their Department or area of
representation. The Union will keep the Company continuously
informed of the names of individuals occupying the above Union
positions.
III. The Company will recall employees to permanent job openings with preference
to the most senior employee who held the position as his/her last job prior
to bump or lay-off or his/her incumbent job. This procedure will continue
by seniority until the recall list is exhausted.
ARTICLE VIII
JOB POSTING
VACANCIES
(1) In the event a permanent job vacancy arises within a department or line (as
defined in Exhibit B), the Company will post notice thereof for bid within
that department or line and plant wide simultaneously. Employees
permanently assigned to the line or department where the opening occurs, as
well as those laid off employees assigned to the line from more than one
(1) year who bid for the position, will be given preference over those
employees who submit plant wide bids. In both instances, senior employees
shall be given preference.
(2) In the event a permanent job vacancy arises on a job not covered by Exhibit
B, the Company shall post notice thereof for bid provided the vacancy was
not caused by a bid for another job.
(3) Permanent vacancies other than the above mentioned shall be filled through
the pre-bid procedure.
(4) New employees will not be eligible to participate in the Job posting
procedure for a period of six (6) months.
Nothing in this Article shall require the Company to fill a vacancy which
it does not desire to fill.
BIDDING
Subject to the provisions set forth in Article VII, an employee may bid on a
posted job by submitting a written request to the Personnel Department within
forty-eight (48) hours from the time of posting, exclusive of Saturdays,
Sundays, and paid holidays. If an employee applies for a job in accordance with
pre-bid procedure and that job is subsequently posted, the employee's pre-bid
application will be the equivalent of a bid and the employee will automatically
be
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considered for the job. Should a period in excess of thirty (30) days elapse
from the date the original bid was first posted and having failed to select a
successful bidder, the position will be re-posted.
PRE-BIDDING
Employees may pre-bid for any job in the bargaining unit by completing an
application. A copy will be retained by the Company, the employee, and the
Union. Each month or at such longer intervals as the Company and Union may
mutually agree upon the Company will publish an up-to-date list with a copy to
the Union showing the names of all prebidders for each job in the plant.
The Company will select the successful bidder, or pre bidder, in accordance with
Section I (A) - Seniority (Article VII) and post the name of such employee on
the bulletin board, with a copy to the Union on the first of each month for the
previous month.
If a dispute arises as to whether an employee has the ability to perform the
job, he shall be given a trial period of not more than ten (10) work days
provided, however, that this period may be extended by mutual agreement between
the Company and the Union. A successful bidder who fails to demonstrate the
ability to perform the job will first be given five (5) days prior consultation
that he/she may be disqualified. If disqualified, he/she shall be returned to
their former job and shift as held prior to the bid, provided he/she is more
senior than the employee now in this position. All subsequently displaced
employees will exercise this option.
If an employee does not have the seniority to exercise the above option, he/she
shall first be assigned to an open available job. If there is no available job
to which the employee may be assigned, said employee will displace the least
senior employee in the plant holding a job other than those in the skilled
crafts, trades, Exhibit E, or those mutually agreed upon as being special skills
jobs.
If there are no qualified eligible bidders or pre-bidders for the posted job or
if an employee has failed to demonstrate the ability to perform the job, the
Company shall undertake to train the senior employee for the position to be
filled provided, however, that this obligation shall not extend to a Skilled
Trades Classification, as listed in Article X of this Agreement. In such cases,
the Company may hire from the outside at its discretion.
A successful bidder or pre-bidder shall not be permitted to transfer to another
job as a result of a bid or pre-bid for a period of six (6) months, plus
training time, unless the job vacancy is in the employees regular line of
progression. However, during the term Of this Agreement, employees will only be
allowed one successful lateral bid. Employees who successfully bid or pre-bid
into a job designated as "Special Skill Jobs" shall not be permitted to transfer
to another job as a result of a bid or pre-bid for a period of twelve (12)
months (See Exhibit E for "Special Skill Jobs" listing). However, a successful
bidder or pre-bidder will be allowed one additional successful bid during the
normal instruction period (which usually is eight weeks time) connected with
training
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a replacement and prior to physically transferring to the new position. (Unless
an unusual circumstance arises which extends the period of time).
Should an employee elect to bid again during the instruction period, prior to
transfer, and is successful, he or she must accept the second successfully bid
position. (The next senior bidder will automatically be in line for
consideration regarding the original posting provided that a period in excess of
30 days has not elapsed.)
The pre-bid of an employee who refuses promotion to a job under this Section
will be removed from the pre-bid file for such job. An employee to be again
eligible must resubmit his pre-bid application.
When it is necessary to fill a temporary vacancy, such a vacancy shall to the
greatest degree consistent with the efficiency of the operation, availability of
replacement, and the safety of employees, be filled on the basis of departmental
upgrading procedures, which provide that senior employees shall be given
preference. However, in case of a permanent vacancy on a job, prior assignment
of a junior employee to a temporary vacancy on such job shall not be used as a
presumption of greater ability in favor of such junior employee if such
temporary vacancy was not made available to the senior employee.
Temporary transfers, for reasons other than illness/injury, will be no longer
than ninety (90) consecutive calendar days.
In making a temporary transfer for more than one full shift, the Company will
first consider the senior active incumbent job holder who presently is in a
lower graded position.
Nothing in this Article will require the Company to keep an employee on a job
for which he is not qualified. The Company will review applications for lateral
or downward bids where physical hardship is involved and may award such bids
after review.
When a job becomes temporarily vacant due to the critical illness of an
employee, and it is questionable as to whether the employee will return to that
specific job, the Company will post the job as though it were a permanent
position. It is also understood that should the ill employee recover and return
to work, physically able to perform said job, he will displace the operator that
replaced him via the job posting regardless of seniority. The successful bidder
will be entitled to the usual rights connected with a job bid award with the
exception of the return of the recovered employee and the displacement aspect
mentioned above. The successful bidder cannot be displaced during a reduction of
the work force except by an employee who has previously held the position or who
currently occupies a position that in Management's opinion is job related. If
this employee is the least senior in the plant, he/she will be displaced prior
to a more senior employee becoming unemployed unless the employee occupies a
skilled trades or special skills job as defined in the agreement.
Bidding Rights
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- If ill/injured employee returns and displaces said employee, the bid
lock-in will not exceed six months regardless of job level.
- If ill/injured employee does not return to the position the bidding
restriction will be per contract 6 mos., 12 mos., etc.
The conditions of this agreement will be made known to the successful bidder in
such cases.
When an employee is medically cleared to return to work after extended illness
and cannot perform his own job because of physical limitations, the following
may apply:
A. He will displace the less senior employee to him holding a job
classification that the company feels he can perform satisfactorily which
complies with his medical clearance.
B. If satisfactory performance is attained, this position will then become the
employee's permanent Job classification.
This understanding is intended to apply primarily to employees covered under the
Accident and Sickness Program. The same will apply to employees receiving
medical clearance from industrial injury who have the capability of performing
satisfactorily on a consistent basis.
The displaced employee will then exercise his options as set forth in the
reduction of work force section of Article VII, (Seniority).
C. The Company and the Union agree that the Company may, at it's discretion,
establish and fill temporary light duty jobs for the purpose of providing
such work for employees who are on Workman's Compensation, and have medical
restrictions. Such temporary positions will not be available as an option
in the normal bidding and bumping procedures, since these are not permanent
positions. The company agrees to discuss the creation of such jobs with the
Union prior to filling the positions. Nothing in this agreement is intended
to displace an active employee from his regular job. These jobs will be
graded according to the C.W.S. Job Evaluation System and paid according to
the contractual wage agreement. In the case of a reduction in work force,
the Company will attempt to relocate temporary light duty employees where
possible in order to retain active employees.
ARTICLE IX
WAGES
1. The following hourly wage rates will remain in effect from May 5, 1997
through May 3, 1998, for all employees on the hourly payroll.
Grade 1 $10.90
Grade 2 $11.85
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Grade 3 $12.85
Grade 4 $13.90
Grade 5 $15.00
Effective May 4, 1998, all rates will increase by $.35/hr. Effective May 3,
1999, all rates will increase by an additional $.45/hr.
2. If a bargaining unit employee is overpaid due to a mechanical or systems
error, over which he/she has no control, and it is determined that the
overpayment was not significantly obvious so as to alert the employee to
the problem, the Company will limit the moneys to be recovered to that
amount overpaid to the employee during the twelve months preceding the date
the error was discovered.
3. It is mutually agreed that temporary transfer situations shall be paid as
follows:
a. Company convenience - employees transferred will be paid the rate of
his own job or the rate to which transferred, whichever is higher.
b. Lack of work placements - employees transferred will be paid the grade
of the job to which transferred.
c. The higher rate will apply only to transfers which are for a period of
one hour or longer.
d. When overtime is not available in an employee's classification and the
employees voluntarily agrees to work in a different classification,
he/she will be paid the rate of the job. Company will consider all
qualified volunteers on an equitable basis.
ARTICLE X
JOB EVALUATION
PRINCIPLES OF THE C.W.S. EVALUATION PLAN
A. STANDARD HOURLY WAGE SCALE
1. The standard hourly wage scales of rates for the respective job
classes and the effective dates thereof shall be those set forth in
Exhibit A of this Agreement.
2. The (5) pay grades shall relate to the (21) C.W.S. job grades as
follows:
PAY GRADE C.W.S. JOB GRADE
1 1-4
2 5-8
3 9-12
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4 13-16
5 17-21
B. NEW AND CHANGED JOBS
1. All Bargaining Unit jobs that have been described and evaluated by the
Job Evaluation Committee in accordance with the provisions of the
C.W.S. Manual for Job Classification of Production and Maintenance
Jobs (Updated as of 1/l/63).
2. The job descriptions and classifications will become effective with
respect to an employee when that employee's job is covered by the CWS
Job Evaluation Plan and shall continue in effect unless:
(a) The Company changes the job content (requirements of the job as
to the training, skill, responsibility, effort, and working
conditions) to the extent of one full job class or more;
(b) The job is terminated or not occupied during a period of one
year;
or:
(c) The description and classification are changed in accordance with
mutual agreement of officially designated representatives of the
Company and the Union.
3. When and if from time to time the Company, at its discretion,
establishes a new job or changes the job content (requirements of the
job as to training, skill, responsibility, effort, and working
conditions) of an existing job to the extent of one full job class or
more, a new job description and classification for the new or changed
job shall be established in accordance with the following procedure:
(a) The Company Job Evaluation Committee will develop a description
and classification of the job in accordance with provisions of
the Manual.
(b) The proposed description and classification will be submitted to
the Grievance Committee for approval, and the standard hourly
wage scale rate for the job class to which the job is thus
assigned shall apply in accordance with the provisions of the
Manual.
(c) If the Company and the Union are unable to agree upon the
description and classification, the Company shall install the
proposed classification and the standard hourly wage scale rate
for the job class to which the job is thus assigned shall apply.
The employee or employees affected may at any time within thirty
(30) days from date of installation file a grievance
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alleging that the job is improperly classified under the job
description and classification of the Manual.
Thereupon the Grievance Committee shall prepare and mutually sign a stipulation
setting forth the factors and factor coding which are in dispute. Such grievance
shall be entered in the 2nd step of the Grievance Procedure and settled in
accordance with the Job Description provisions of the Manual. If the grievance
is submitted to the Arbitration Procedure, the decision shall be effective as of
the date when the new job was established or the change or changes installed but
in no event earlier than thirty (30) days prior to the date on which the
grievance was filed.
(d) In the event the Company does not develop a new job description
and classification, the employee or employees affected or the
Grievance Committee may, if filed promptly, process a grievance
under the grievance procedure of this Agreement requesting that a
job description and classification be developed and installed in
accordance with applicable provisions of the Manual.
C. CHANGED JOBS OF LESS THEN ONE JOB CLASS
1. When Management changes a job, but the job content change is less than one
full job class, a supplementary record shall be established to maintain the
job description and classification on a current basis and to enable
subsequent adjustment of the job description and classification for an
accumulation of small job content changes as follows:
(a) Management shall prepare, on the form set forth, a record of the
change involved, such record to become a supplement to the job
description and classification and be transmitted to the appropriate
Union representative through the procedure of this manual. This record
shall contain statement of the additions to or deletions from the job
description, the factor classifications in effect before the job was
changed, the proposed new factor classifications and the net total
change.
(b) When and if an accumulation of such fractional job content changes
equals one full job class or more, a new job description and
classification for the job shall be established in accordance with
this manual.
2. When Management terminates a job, or a job is not occupied during a period
of one year, a record as to cancellation of the applicable job description
and classification shall be established as follows:
(a) Management shall prepare, on the form set forth in this manual, a
record of the canceled job description and classification. This record
shall contain identification of the job, and statement of causes for
cancellation of the job description and classification, such as: job
terminated, job not occupied during period of one year; etc.
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(b) Such record shall be transmitted to the appropriate Union
representative through the procedure of this manual.
3. When Management changes the identification details relative to a given job,
such as name of the department or sub-division, or plant title or code of
the job, a record as to such change shall be established as follows:
(a) Management shall prepare, in the form set forth in this manual, a
record of the identification change. The heading of the record shall
show the identification details of the job prior to change, and the
changes to be made shall be enumerated under the caption of
"Description Change."
(b) Such record shall be transmitted to the appropriate Union
representative of the employees affected through the procedure of this
manual.
D. SKILLED TRADES CLASSIFICATIONS AND TRAINEES
Skilled Trades Classifications will be considered to be:
Tool and Die Maker
Toolmaker
Machinist
Electrician - Electronic Electrician - Shop
Electrician - Instrument Technician
Millwright
Machinist Welder
Die Sinker
ARTICLE XI
PRODUCTIVITY IMPROVEMENT PLAN
The Company and Union recognize the need to encourage and reward productivity.
The procedure for recognizing and rewarding improvements in productivity shall
be the Productivity Gainsharing Plan.
The productivity gainsharing plan shall be a plant wide bonus plan based on the
productivity of the direct labor bargaining unit employees.
The clock hours of new hires will not be included in the calculation of the
productivity index for their first four (4) weeks of employment.
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The clock hours of non-probationary employees who, because of a bump or bid,
require training by a trainer will not be included in the calculation of the
productivity index for up to five (5) days of training.
The measure of productivity shall be an index equal to the amount of earned
direct labor hours divided by the total clock hours of direct labor employees.
Earned direct labor hours shall be defined as the standard hours assigned to the
productive labor operations. These operations are assigned to labor account 000.
Other operations such as setups, book allowances, etc., are not considered as
earned direct labor even though they have a labor standard.
Total clock hours shall be defined as all the clock hours of those employees
classified as direct, regardless of whom time was spent.
The productivity index shall be computed for each calendar quarter.
Bonus computation will be based on a comparison of the quarterly index to the
base index. The base index shall be .830 effective 5/2/94.
The bonus plan shall be a 90% Gainsharing Plan. For each 1% change in the index,
a .9% payment will be awarded.
If the productivity index for a quarter is higher than the base index a bonus
payment shall be issued.
FORMULA: Quarterly Index - 1 x .9 + Bonus %
---------------
Base Index
EXAMPLE: 1.00 = (1.25) - 1 = 18.4%
---- ----------
.830
All bargaining unit employees will receive a bonus payment equal to their
straight time earnings during Bonus Quarter times bonus %.
If the quarterly index is lower than the base index, a pay deduction shall be
computed using the same procedure.
In order to encourage true productivity gains the following practices shall
apply.
1. Labor standards will be frozen at base levels. Any improvements in
productivity, regardless of the source, shall enhance the bonus
opportunity. Methods changes that are detrimental to quality, safety or
machine operation will not be allowed.
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2. New standards will be established for new products and new equipment.
Previously established Industrial Engineering practices shall be employed.
The clock hours spent on new equipment or new products shall not be used in
the bonus computation until such time as standards are issued. Operators on
new equipment or new products shall receive bonus payments.
3. Direct Earned Hours for unacceptable quality work due to operator error
will not be used in the computation.
The productivity gainsharing plan described above shall become effective on the
effective date of the labor agreement between the Union and Simonds Industries
Inc.
Simonds Industries Inc. and the Union mutually encourages ongoing productivity
gains. The Company will endeavor to work with the Union to refine, modify or
improve this plan and/or devise alternate plans which promote productivity
gains.
ARTICLE XII
GRIEVANCE AND ARBITRATION PROCEDURE
SECTION 1. SETTLEMENT OF GRIEVANCES
A. An employee having a request or complaint shall first present it to his
foreman. The employee may ask his Union Representative to accompany him in
his discussion with the foreman.
B. A grievance is defined as any dispute between the Company and the Union, or
between the Company and any of its employees, arising during the term of
this Agreement and involving an alleged violation of the terms of this
Agreement or an alleged failure to comply with the Agreement, or a dispute
as to its interpretation or application.
C. Any grievance, as above defined, shall be processed in the following
manner:
STEP 1 The employee, or the Union Representative, shall first verbally
present the grievance to his foreman within five (5) working days
after occurrence of the event or the date on which the employee knew
or could have known of the event and the foreman shall give his answer
within five (5) working days. If the grievance cannot be resolved
orally, the employee or his Union Representative shall submit the
grievance to his foreman promptly in writing on a form agreed to by
the parties and provided by the Company for this purpose. The
grievance form shall be dated and signed by the employee or his union
representative. The foreman shall provide an answer to the employee or
his union representative in writing within five (5) working days of
his receipt of the grievance form.
STEP 2 If the Union wishes to appeal the grievance further, the designated
management representative shall be notified by the grievance
committeeperson within five (5)
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working days after receipt of the foreman's answer. The designated
management representative shall meet with the appropriate grievance
committeeperson within five (5) working days after receipt of notice
from the Union. The Company's answer shall be given in writing within
five (5) working days after the meeting with the committeeperson.
STEP 3 The grievance, to be considered further, must appear on the agenda
for the next scheduled third step grievance meeting. If not, the
grievance shall. be considered settled on the basis of the Company's
Step 2 answer. Agendas shall be exchanged three (3) working days prior
to the monthly grievance meeting. The Director of Industrial
Relations, or his representative, shall meet with the Grievance
Committee, including the President of the Local Union, as an
ex-official member of such Committee, and the Staff Representative, at
the next scheduled grievance meeting. The Company's answer shall be
given in writing within seven (7) working days after the meeting on
the grievance.
SECTION 2. ARBITRATION
A. If either the Union or the Company wishes to appeal the grievance further,
it shall notify the other party in writing on its desire to submit the
matter to arbitration. Such notice must be received within fifteen (15)
working days after receipt by the Union of the Company's answer at Step 3.
If the parties are unable to agree on an Arbitrator within five (5) working
days after notice to the Company, the matter shall be referred to the
American Arbitration Association.
B. The Arbitrator shall be without authority to change, alter or amend the
terms of this Agreement. In no event shall any disposition or award upon
any grievance be made retroactive for any period longer than thirty (30)
calendar days prior to the date the grievance was filed in writing in Step
1. The fees and expenses of the Arbitrator shall be shared equally by the
parties and the decision of the Arbitrator shall be final and binding upon
both parties, including the grievance. The voluntary labor arbitration
rules of the American Arbitration Association shall govern the selection of
an Arbitrator and all proceedings.
ARTICLE XIII
REPRESENTATION
SECTION 1
The company will carry on all Union relations through the accredited Staff
Representative, Grievance Committee, and accredited Representatives of the
Union.
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SECTION 2
The Company agrees to recognize Union representation. Defined areas and the
number of Representatives recognized may be changed upon prior written mutual
agreement of the Company and the Union. Areas of representation will be posted
on the Union bulletin board.
SECTION 3
The Local Union will notify the Company in writing of the name and status of any
Union officials referred to herein and notify the Company in writing of any
revisions in such.
The Company will give the Local Union President a similar notice on changes in
supervision and area supervised.
SECTION 4
The Company will recognize a Union grievance committee consisting of four (4)
members. The Union shall furnish the Company, in writing, with the names of such
members.
SECTION 5
The Company agrees to recognize alternate members of the Grievance Committee and
alternate representatives, providing such individuals are replacing absent
accredited committee members or representatives for a period of five working
days or more and providing advance written notice is given by the Union of the
name of the individual.
SECTION 6
Grievance Committeepersons, with the permission of the foremen, shall be
afforded reasonable time off without pay to investigate or process grievances.
It is understood that such activities shall not interfere with production.
SECTION 7
Requested quarterly meetings between the Grievance Committee and the Company
will be at a time and place designated by the Company.
ARTICLE XIV
DISCIPLINE
SECTION 1
The Company shall have the right, at any time, to adopt reasonable rules and
regulations. All employees shall be subject to such rules and regulations.
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In enforcing such rules and regulations, or other accepted standards of
industrial behavior, the Company has the right to discharge, suspend, or
otherwise discipline for just cause.
In determining the appropriate discipline in case of a violation, the Company
shall exercise its discretion subject to the provisions of this Agreement and
shall advise the Union of any formal disciplinary action taken against an
employee. Such action shall be subject to the grievance and arbitration
procedure except in the case of a probationary employee. When disciplinary
hearings involve a Company Department Head, the Union will be given reasonable
notice of said hearing. if said hearing is for an 11 - 7 shift employee, the
Union will be notified of said hearing by 2 PM on the day before the hearing.
SECTION 2
Where the Company decides to discharge or suspend an employee with seniority,
the employee and the Union shall be so notified and the reasons therefor. In no
case will the employee be peremptorily discharged, but shall first be suspended
for five (5) working days, during which time there shall be a hearing attended
by the employee and representatives of the Company and the Union. Before the end
of the five (5) working day period the Company shall decide whether the
suspension is to be revoked, extended, or converted into a discharge. The
employee may challenge the Company's action through the grievance procedure,
commencing at Step 2, by submitting a written grievance in the usual form to the
Management representative.
ARTICLE XV
VACATION
SECTION 1
The vacation year will be the period from June 1 to May 31 of the following
year. The vacation qualifying period will be the 12 months (June 1 - May 31)
preceding the vacation year.
SECTION 2
To be eligible for a vacation in any vacation year during the term of this
Agreement, the employee must:
(a) have one year or more of continuous service,
(b) have performed work in at least 50% of the pay periods in the vacation
qualifying period, except that in the case of an employee who completes one
year of continuous service in the vacation year, he shall have performed
work in at least 50% of the pay periods during the twelve (12) months
following the date of hire of his last continuous employment. An employee
who qualifies for the first year anniversary vacation week in the month of
May, will be allowed to take vacation during the anniversary week provided
there is no scheduling problem. However, should vacation scheduling
problems arise during the month of May, said employee(s) may receive
vacation pay in their anniversary week, and
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schedule the vacation time during Plant Shutdown or take both vacation pay
and time during Plant Shutdown. Time an employee spends on vacation or on
an injury compensable under Workman's Compensation shall be considered as
time worked except to the extent provided in Section 11.
In the event of an employee's vacation is scheduled during a period when he or
she is out on a bona fide A & S claim or industrial accident, if the employee so
requests, the company will endeavor to schedule time off, if possible,
consistent with production needs and at the approval of supervision. It is
agreed that there will be no duplication of pay in such instances.
An employee with more than one year of continuous service who is ineligible for
a vacation because of failure to perform work in at least 50% of the pay periods
in the vacation qualifying period due to layoff or sickness shall be entitled to
one week's vacation, if he has performed work in at least 50% of the pay periods
in the twelve (12) months preceding January of the vacation year. An elected
Union Official may count time off work on Union business towards said 50% of pay
periods.
Days lost as a result of a bona fide injury or illness compensable under
workers' compensation or A and S, will count toward fulfilling the eligibility
requirements for vacation pay only for the vacation year in which the original
precipitating event occurred. Such pay will be paid upon the return to work of
said employee. Employees returning to work following such an occurrence, will
be required to work fifty percent (50%) of the then current remaining
eligibility period in order to qualify for vacation for the current year.
SECTION 3
An eligible employee who has attained the years of continuous service indicated
in the following schedule in any vacation year shall receive a vacation
corresponding to such years of continuous service as shown in the following
schedule:
1 or more years continuous service 1 Week
3 or more years continuous service 2 Weeks
7 or more years continuous service 3 Weeks
15 or more years continuous service 4 Weeks
25 or more years continuous service 5 Weeks
The Company will allow "patch time", for vacation only, for those active
employees who originally took the "window" in 1988.
SECTION 4
There shall be no duplication of either vacation eligibility or vacation payment
for any employee in any vacation year. No vacation time may be accumulated from
one year to the next.
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SECTION 5
The Company shall have the option to schedule vacation shutdowns according to
the needs of the business. In the event of one or more scheduled plant vacation
shutdowns within the vacation year, employees other than those employees
scheduled to work may have in the case of a second shutdown, their vacation time
scheduled during such shutdown period. Employees entitled to additional vacation
beyond the period of plant vacation shutdowns will have their vacations
scheduled at other times during the vacation year, consistent with the
preference of longer service employees and consistent with operating
requirements.
The Company will give notice in January of any vacation shutdown to be scheduled
in June, July, or August. Such shut-down shall be considered vacation for all
eligible employees not scheduled to work during this period. A planned program
of scheduling all additional vacation time available will then be undertaken and
completed in the first quarter of each calendar year. The company will consider
an employee's request to work a double shift so as to prepare for a Holiday or
scheduled vacation. Should a request of this nature be approved by supervision
it is understood that all premium pay normally associated with working these
additional hours would be waived. A request of this nature may be considered in
emergency situations if approved by supervision. In all such requests safety and
health aspects will be a factor. Any such request will be brought to the
attention of the area union representative.
Those employees scheduled to work production during shutdown will be given the
option to take vacation or work with the general maintenance crew, if in fact
production work is not available. It is understood that general maintenance work
will be paid as stipulated in the contract.
SECTION 6
A. Extra maintenance crew help will be recruited using a voluntary
sign-up sheet. Selection will be based on seniority and future
production requirements. After exhausting the voluntary list, a
mandatory crew, assignments will be made using reverse seniority.
Volunteers will be allowed to schedule their vacation at a later date.
This procedure does not apply to employees with less than two (2)
weeks of earned vacation.
B. It is agreed that general maintenance (Shutdown), grade 6, will be
included as a permanent job in the CWS structure.
This job will only include those employees performing the general
maintenance duties during the vacation shutdown period. This job will
not include those employees working their regular job during the
vacation shutdown period.
SECTION 7
A. The vacation pay will be based on 40 hours. Beginning with the
vacation year 6/1/95, vacation pay will be calculated using average
hours for the preceding
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vacation qualifying period (June - May). Said pay will be based on 40
hours minimum, 44 hours maximum.
B. The vacation pay will be at the individual employee's average earned
straight time hourly rate, including shift premiums, based on the
period between January 1 and May 31 preceding the vacation year.
SECTION 8
When a paid holiday falls within the vacation week, the employee affected shall
have the option of receiving the Holiday Pay with no additional time off or
taking an additional day's vacation. Should the employee elect to take the
additional day, one week's prior notice must be given to supervision, and the
additional day must be either the scheduled work day immediately preceding the
vacation week or the scheduled work day immediately following the vacation week.
SECTION 9
Persons having military obligations are not obligated to schedule their
vacations to coincide with training periods. Should a plant vacation shutdown
happen to coincide with such a training period, the vacation may be taken at
some later date, or he may receive vacation pay in lieu if he chooses.
SECTION 10
The Company and the Union intend that to the greatest extent possible, eligible
employees shall receive the benefit of vacation from work. However, it is
recognized that operating requirements may make it necessary to require that
some employees postpone their vacation to a later date or to request that some
employees work and receive a vacation allowance in lieu of actual vacation time.
The Company and an individual employee may mutually agree that vacation payment
will be made in lieu of actual time off from work.
SECTION 11
In the event of termination for any reason, an employee will be paid for any
unpaid vacation for which he is eligible.
In the event of termination due to retirement for any reason, a retiring
employee will not be eligible for vacation or vacation pay unless he qualifies
under Section 2 using the full 52 pay periods qualifying period; provided,
however, that only for employees retiring between January 1 and May 31, they may
be eligible for vacation as follows:
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(1) If the employee's retirement is due to normal retirement at age 65, he will
be eligible for vacation if he actively performs work in 50% of the pay
periods between June 1 and the date of his normal retirement; or
(2) If the employee's retirement is for any reason, prior to normal retirement
at age 65, he will be eligible for vacation on a pro-rata basis (using the
number of pay periods considered as time worked as the numerator and 52 as
the denominator of the fraction) but the time such an employee spends on
vacation between June 1 and the date of his retirement will not be
considered as time worked.
ARTICLE XVI
HOLIDAYS
SECTION 1
The days on which the following holidays are observed shall be paid holidays for
employees who meet the eligibility requirements:
New Year's Day
Washington's Birthday
Good Friday
Memorial Day
July 4th
Labor Day
Thanksgiving Day
Day after Thanksgiving
Christmas Day
1 Personal Floating Holiday
Employee's Birthday
An eligible employee shall receive average straight time hourly rate for the ten
(10) weeks preceding the holiday. This average does include shift differential,
if applicable.
SECTION 2
In order to be eligible for holiday pay, an employee must meet the following
requirements:
(a) Be a full-time employee
(b) Work his scheduled work day before and his scheduled work day after the
holiday, unless excused by the Company for a legitimate reason.
(c) He must have performed work sometime during the calendar week in which the
holiday is observed, or the calendar week prior thereto unless his failure
to meet this requirement is caused by absence because of (1) a continuous
period of verified personal illness in which
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case he shall be eligible for payment for the paid holidays set forth above
which fall during such period, but only up to a maximum of 52 weeks from
the last day worked, (2) jury duty, (3) military encampment, (4) paid
vacation.
(d) Should the Company schedule work for the 3-11 shift on Christmas or New
Year's Eve, it will be optional.
SECTION 3
An employee working on a holiday shall receive holiday pay and in addition shall
be paid one and one-half times his average earned straight time hourly rate for
hours worked on the holiday. An employee who works on a scheduled holiday and
who requests another day off at no pay in place of that holiday, at the time of
the scheduled holiday work, the Company wherever possible will endeavor to
provide that time off consistent with production needs. If this request is
granted, the day off will be scheduled within the next three month period. An
employee's birthday holiday may be scheduled from the Friday before to the
Monday following if the employees foreman agrees but, in that event, the
employee shall not be entitled to time and one-half under this section if he
works on his birthday.
SECTION 4
Should an employee scheduled to work on a holiday fail to report for work
without reasonable excuse, he will forfeit his right to holiday pay as herein
above provided.
SECTION 5
Probationary employees will receive holiday pay for those holidays occurring
during their probationary period only after successfully completing their
probation.
SECTION 6
Employees receiving a workers' compensation payment for a Company paid holiday,
will not be eligible to receive a duplicate payment from the Company.
ARTICLE XVII
HEALTH AND SAFETY
SECTION 1
The Company will continue to make systematic safety inspections, and to provide
safety devices, guards, and medical service to minimize accidents and health
hazards on its premises.
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SECTION 2
The Union will cooperate with the Company in the continuing objective to
eliminate accident and health hazards. To this end, an advisory joint health and
safety committee will be established consisting of (3) members appointed by the
Union and at least (3) by the Company. This group shall meet at least monthly to
review ways of meeting the stated objective. The agenda for the meeting will be
prepared by the Company and will include subjects proposed by the Union
representatives. It is understood that with respect to the addition of the 11:00
P.M. - 7:00 A.M. Safety Committee person, the following method of pay will apply
when this individual is required to make a special off-shift trip to the plant
so as to attend the monthly safety meeting.
The 11:00 P.M. - 7:00 A.M. Safety Committee Person will receive his/her base
rate for the time spent in attendance at the safety meeting.
This understanding pertains to the 11:00 P.M. - 7:00 A.M. shift Safety Committee
Person only, and will not set a precedent with respect to any committee or
individual.
ARTICLE XVIII
JURY DUTY
A non-probationary employee, who is called for jury service or - who is
subpoenaed as a witness shall be excused from work for the days on which he is
required to report for jury duty or serve as a witness. Service, as used herein,
includes required reporting for jury duty or witness service when summoned,
whether or not he is used. Such employee shall receive, for each such day of
service, on which he otherwise would have been scheduled to work the difference
between the rate of his regularly assigned classification for the period worked
prior to such service and the payment he receives for such service (not
including travel pay). The employee will present proof that he did serve or
report as a juror or was subpoenaed and reported as a witness and the amount of
the pay, if any, received therefor. An employee will be expected to report for
scheduled work on days he is not required to report for jury or witness service.
ARTICLE XIX
LEAVE OF ABSENCE
SECTION 1
A leave of absence for personal reasons may be granted an employee by the
Company in its discretion. A leave of absence may be granted for any period up
to six (6) months, and provided written application is made and approved before
a previous leave has expired, may be extended for further six (6) months or
shorter periods. The Union will be notified of any such leave.
SECTION 2
Seniority will accumulate during an approved leave of absence.
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SECTION 3
An employee on leave of absence shall have life insurance, group hospital and
medical insurance coverage to the end of the month in which his leave commenced.
The employee shall be permitted to continue his life insurance, group hospital
and medical insurance for the balance of his leave provided he pays the
appropriate premium.
SECTION 4
Employees receiving workers' compensation or sickness and accident benefits,
will have twelve (12) months of medical coverage from the date of the original
qualifying event with appropriate co-pay required. This continuation coverage
shall run coterminously with the first twelve (12) months of the company's
obligations under COBRA; however, no additional premiums beyond those paid by
active employees shall be assessed until the 13th month of the continuation
period, as permitted by COBRA.
ARTICLE XX
MILITARY SERVICE
SECTION 1
A non-probationary employee who is required to attend an encampment of the
Reserve of the Armed Forces or the National Guard shall be paid, for a period
not to exceed two weeks in any calendar year, the difference between the amount
paid by the Government (not including travel, subsistence and quarters
allowance) and the amount calculated by the Company according to the following
formula: such pay shall be based on the number of days such employee would have
worked had he not been attending such encampment during such two weeks (plus any
Holiday in such two weeks which he would not have worked) and the pay for each
such day shall be eight (8) times his average straight time hourly (including
shift premium) rate during the last payroll period worked prior to the
encampment. If the period of such encampment exceeds two weeks in any calendar
year, the period on which such pay shall be based will be the first two weeks he
would have worked during such period.
SECTION 2
A non-probationary employee who is placed on leave of absence for the purpose of
entering the Armed Forces for active duty voluntarily or involuntarily, shall
accumulate seniority while fulfilling this obligation.
In order to retain this accumulated seniority, the employee must report to the
Personnel Department within ninety days of his discharge with a certificate to
the effect that he has satisfactorily completed his active duty. The employee
will then be returned to work in line with his seniority.
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SECTION 3
An employee who, after being honorably discharged from the Armed Services of the
United States is reinstated in employment pursuant to applicable statute, shall
be entitled to vacation pay or allowance in and for the vacation year of
reinstatement based upon his continuous service eligibility, without regard to
any other requirement.
ARTICLE XXI
ALLOWANCE FOR FUNERAL LEAVE
When a non-probationary employee is absent due to the death and funeral of his
or her legal spouse, mother, father, mother-in-law, father-in-law, son,
daughter, brother or sister (including stepfather, stepmother, stepchildren,
stepbrother, stepsister when they have lived with the employee in an immediate
family relationship), an employee, upon request, will be excused and paid for up
to a maximum of three (3) shifts for which he was scheduled (or for such fewer
scheduled shifts as the employee may be absent) which fall within a three (3)
consecutive work day period, provided, however, that one such funeral leave day
shall be the day of the funeral and it is established that the employee attended
the funeral. When a non-probationary employee is absent due to the death of his
sister-in-law, brother-in-law, the employee, upon request, will be excused and
paid for up to a maximum of one (1) shift (Grandparents, two (2) shifts); for
which he/she was scheduled, provided, however, that the day shall be the day of
the funeral and it is established that the employee attended the funeral. If
there is no funeral service at the time of death, attendance at a Memorial
Service conducted within six months of the death may be substituted.
Payment shall be eight times his average straight-time hourly earnings. An
employee will not receive funeral pay when it duplicates pay received for time
not worked for any other reason.
ARTICLE XXII
DISCRIMINATION
It is the continuing policy of the Company and the Union that there shall be no
discrimination with regard to race, color, religious belief, national origin,
age or sex.
ARTICLE XXIII
BULLETIN BOARDS
The Union shall have the right to post notices on specific bulletin boards
provided for that purpose. Copies of all such notices shall be submitted to a
designated representative of Management prior to posting and shall be restricted
to: (1) notices of meetings of the Union, (2) notices of its election, (3)
notices of its appointments to office and the results of election, and (4)
notices of its social, educational or recreational affairs.
ARTICLE XXIV
STRIKES AND LOCKOUTS
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SECTION 1
During the term of this Agreement there shall be no strike walkout, slowdown or
picketing or any concerted action, by the Union or any employee or group of
employees, which may interfere with operations.
Any employee participating in such violation shall be subject to immediate
discharge or other disciplinary action.
If any of the acts prohibited by the first paragraph occur, the Union promptly
after the beginning of such violation shall disavow any part in such action and
its officers shall take reasonably positive steps to have employees cease such
action immediately.
SECTION 2
There shall be no lockout by the Company during the term of this Agreement.
ARTICLE XXV
PRIOR GRIEVANCE
No grievance alleged because of conditions existing prior to the date of this
contract shall be presented for adjustment in the Grievance Procedure except
insofar as the conditions upon which said grievance is based continue in effect
and are the proper subject of a grievance under this Agreement.
ARTICLE XXVI
INSURANCE
An exhibit setting forth agreements relating to Non-Occupational Disability
Insurance, Life Insurance and Hospital and Surgical Insurance attached hereto as
Exhibit C is hereby incorporated by reference and made part of this Agreement.
ARTICLE XXVII
PENSIONS
An agreement relating to pensions attached hereto as Exhibit D is hereby
incorporated by reference and made part of this Agreement.
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ARTICLE XXVIII
MISCELLANEOUS
SALE OF COMPANY
The Company shall require, as a condition of the sale of the Company or of the
Fitchburg Facility, any successor employer to recognize the Union as the
collective bargaining representative of its employees, rehire all employees, and
abide by all the terms and conditions of this Agreement.
ARTICLE XXIX
SUB-CONTRACTING
In the event the Company finds it necessary to sub-contract work out which is
customarily performed by the bargaining unit at the Fitchburg facility, it will
give notice to the Union prior to subcontracting the work. Further, the Company
will discuss the economic and business reasons of the decisions to sub-contract
with the Union and make a good faith effort to have the work to be
sub-contracted done by active bargaining unit employees. The Company, however,
reserves the right to sub-contract bargaining unit work if business and economic
reasons deem it appropriate to do so.
ARTICLE XXX
TERMINATION
This Agreement shall be effective for the period from May 5 1997, to 11:59 P.M.
of April 30, 2000 and from year to year thereafter unless either party gives at
least 60 days notice in writing to the other party prior to April 30, 2000 or 60
days notice in writing prior to any subsequent anniversary date of this
Agreement of the desire of such party to terminate or modify this Agreement.
In witness whereof the parties by their respective representatives thereunto
duly authorized have caused this Agreement to be executed on the day and year
first above written, at Fitchburg, Massachusetts.
STEELWORKERS COMPANY
Charles McLaughlin Robert Deedrick
Steven Meattey James Carnivale
Ronald Richards Ronald Larsen
William Brown John Kifer
Ronald Davis John Jordan
Richard Hautala Louis Alberghini
Richard Souliere
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EXHIBIT A
STANDARD HOURLY WAGE SCALE
The following hourly wage rates will remain in effect from May 5, 1997 through
May 3, 1998.
C.W.S. RATE PAY GRADE RATE
1-4 1 $10.90
5-8 2 $11.85
9-12 3 $12.85
13-16 4 $13.90
17-21 5 $15.00
An adder will be paid to 2nd and 3rd shift employees.
2nd shift $.25 per hour
3rd shift .35 per hour
Effective May 4, 1998, all rates will increased by $.35/hr. Effective May 3,
1999, all rates will increase by an additional $.45/per hour.
<PAGE> 37
EXHIBIT B
SENIORITY DEPARTMENTS
Line 4 Customer Products
Line 8 Bits and Shanks
Line 10 Hand Hacksaws
Line 11 Heat Treat
Line 12 Power Hacksaws
Line 13 Steel Rule
Line 16 Inserted Tooth
Metal Saws
Line 18 Carbon Band
Line 19 Weld Edge Band
Line 25 Toothing Department
Line 26 Carbide Tip Bandsaws
Line 39 Eastern Sales
Line 42 Tool Crib
Line 43 Tool Department
Line 45 Machine Shop
Line 46 Electrical Shop
Line 47 Millwrights
Line 48 Yard
Line 49 Housekeeping
Line 56 Raw Stock/
Receiving/Wheel
Storage/Rotoclone
Line 80 Shipping
<PAGE> 38
EXHIBIT C
INSURANCE
This shall confirm that insurance coverages are in place for medical, dental,
ortho, A & S, Life, AD & D, and Retiree Medical. There will be no employee
co-pay for medical insurance premiums through 12/31/97 and no employee co-pay
for dental insurance premiums through 12/31/98.
Also, the Company will increase its monetary contribution to cover any increases
in the Fallon HMO effective January 1, 1998 and January 1, 1999 and January 1,
2000. Any monetary increase required on these dates will not exceed six percent
(6%) of the premium then in effect. Additionally, the Company will make a
similar monetary contribution, with a like restriction, for premium increases
experienced with Delta Dental on January 1, 1999 and January 1, 2000. Any
increases over and above the said six percent (6%) shall be absorbed by the
employee.
In the event that a monetary increase does not reach the said six percent (6%)
level in a particular insurance plan year, the excess dollar amount for that
particular year is carried forward to offset any monetary increases over and
above the six percent (6%) level of the ensuing plan years during the life of
this Labor Agreement. Under no circumstances will any carry over extend beyond
the termination date of this Agreement.
It is also mutually agreed that all non-probationary employees at the time of
lay off will be covered under the group medical plan for two months from the end
of the month of lay off.
This understanding will provide all laid off employees while unemployed the same
amount of coverage, and will no longer involve the 10th of the month billing
cycle as a determining factor.
Highlights of the benefits provided are as follows:
Fallon - HMO (See Company provided Handbook).
Dental - Delta
Effective 1/1/98 -
$50.00 Deductible x 3
$1,500 Dental Coverage per person/per calendar year
$1,000 Ortho Lifetime Maximum
Employees opting not to participate in the Simonds Industries Inc. medical
and/or dental program will receive 25% of any premium savings.
A&S
$300 Weekly Indemnity for up to 26 weeks. Beginning l/l/98, Weekly
Indemnity is increased to $320. Beginning 1/l/99, Weekly Indemnity is
increased to $340. Beginning 1/l/2000, Weekly Indemnity is increased
to $350.
<PAGE> 39
Eligibility is from the first day of accident, provided employee is
absent from work seven (7) days, and 8th day of illness.
Life Insurance
Effective May 5, 1997 $14,000 Member
Effective May 5, 1998 $18,000 Member
Effective May 5, 1999 $20,000 Member
AD & D - 2 times the benefit
A bargaining unit employee shall have the option to purchase additional life
insurance coverage over and above the basic life insurance benefit by
contributing an amount equal to the Company premium required to be paid to the
carrier on a monthly cost per thousand basis. An employee shall be able to
exercise this option up to a maximum of $12,000.00 additional life insurance
coverage.
New employees must enroll for coverage at time of hire.
Retiree Medical Insurance - for employees retiring between ages 62-65.
The Company will contribute $100 per month towards medical insurance
until the retiree reaches the age of 65.
The above listing does not describe all of the terms and benefits. Those are
described in the summary plan description booklets and are subject to the terms
of the supplemental agreement.
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EXHIBIT D-PENSIONS
U.1.U. PENSION CONTRACT
This shall confirm that there exists a supplementary agreement between Simonds
Industries Inc. and the U.1.U Pension Trust. This agreement outlines the
company's obligation to the trust as follows:
1. Effective May 2, 1994, the company shall contribute 6% of base pay for all
employees completing 10 years of service with Simonds Cutting Tools/Simonds
Industries Inc.
2. The company shall contribute 5% of base pay for all other employees.
The parties agree that base pay shall be defined as total gross wages, including
overtime, holidays, vacation, but excluding suggestion or safety awards, and
productivity gainsharing bonuses.
The U.1.U. Pension Trust defines normal retirement at 65 years of age with 5
years of covered service and defines early retirement at 60 years of age again
with 5 years of covered service.
<PAGE> 41
EXHIBIT E
SPECIAL SKILL JOBS REQUIRING
EXTENDED TRAINING PERIODS
JOB TITLE CODE
Grinder, Form, Surface, Bevel 04-02
Filler, Specialty & Fitter - Circular Saws 04-09
Heat Treater, B & S 08-03
Drop Forge Operator 08-11
Group Leader Drop Hamm 08-21
Group Leader In-Line and Inspect 08-24
Q.C. Technician - Wood 08-30
Grinder - Bevel - Six Head 13-03
E.D.M. Operator 13-21
Broacher - Vertical 18-01
E.B. Welder #2 19-02
Shot Peen & Temper 19-08
Fenn Rolling Machine 19-12
Key Man Composite Bandsaw Area 19-15
Milling Machine Operator Toothing 19-17
Setting Push Type and Deburr 19-18
Key Man Bandsaw Milling Area 19-20
Q.C. Technician - Metal 19-30
CNC Grinder Operator 19-31
Weld and Fit CTMB 26-01
Leadman Carbide Tipped Metal Band 26-02
Group Leader Cutter Grind 43-16
Utility Shipper 80-07
NOTE: JOB 18-08, SETTER ROTARY WILL BE DESIGNATED AS SPECIAL SKILLS WHEN
ELECTRONIC NON-CONTACT GAUGING SYSTEM IS OPERATIONAL.
It is agreed that future jobs requiring extended training period will be
evaluated, and by mutual agreement will be added to this category if they
qualify as "Special Skill Jobs".
<PAGE> 42
EXHIBIT F
(POOL JOBS)
Grinder, Finish Bits 08-04
Milling Machine Operator - Butts 08-10
Boxer Bandsaw 18-16
Deburr Operator 18-18
Boxer, Wrapper 39-03
Janitor 49-01
EXHIBIT G
This shall confirm that there will exist a 401K Savings Plan which will be
established as soon as practical following Contract ratification. Features of
the plan will include:
- Participation by Fitchburg Bargaining Unit employees of record as of
5/5/97. All new bargaining unit employees may participate following
probation.
- The Plan is non-contributory by the Company.
- The Plan will be administered by the currently established Corporate
Plan Administration Committee.
- Maximum contributions by employees will be as legally allowed.
- Plan will have specific loan provisions.
- Participants will be allowed to direct their contributions into
various investment vehicles.
- Participants will be fully vested.
- Once established, a complete plan description will be available as
legally required.
LETTER OF UNDERSTANDING
The Company and the Union agree to form a joint committee for the purpose of
monitoring dental and health insurance cost containment. Any new plans
investigated shall mirror all existing coverages. No changes in existing
coverages will be made without the written authorization of the Company and the
Union.
<PAGE> 43
LETTER OF UNDERSTANDING
The Company will undertake to direct supervisors that "performing the work of
bargaining unit employees in emergency situations" must be invoked only in the
case of a bona fide emergency where the safety of employees or the potential
loss of production capability is eminent.
LETTER OF UNDERSTANDING
The clock hours of employees in Job Codes 19-15, Keyman Composite Bandsaw Area
and 19-20, Keyman Milling Area, will be classified as Direct for purposes of
Productivity Index calculation.
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Exhibit 10.11
AGREEMENT
LOCAL NO. #2737-16
(1) THIS AGREEMENT, dated April 6th, 1998 hereinafter referred to as the
Basic Agreement, between Simonds Industries Inc., Newcomerstown, Ohio or its
successors (hereinafter referred to as the Company) and the United Steelworkers
of America, AFL-CIO (hereinafter referred to as the Union).
ARTICLE I
RECOGNITION
(2) Section 1. The Company recognizes the Union as the exclusive bargaining
agent for collective bargaining purposes for all of its production and
maintenance employees, excluding executives, draftsmen, engineers, foremen,
assistant foremen, watchmen, gatemen, timekeepers and clerical employees.
(3) Section 2. As a condition of employment, all employees shall become and
remain members of the Union in good standing in accordance with the constitution
and by-laws of the Union during the life of this agreement. New employees, no
later than fifty five (55) working days worked after the date of hiring shall,
as a condition of continuous employment, become and remain members of the Union
in good standing in accordance with the constitution and by-laws of the Union
during the life of the Agreement.
(4) Section 3. The Company shall deduct from the pay for the third full
payroll period each month, the Union dues for each month, initiation fee if
owing, and assessments, and remit same to the International Treasurer of the
Union upon the basis of, and for the term of individually signed voluntary
checkoff authorization cards heretofore and hereafter submitted to the Company.
(5) Section 4. The Company shall require, as a condition of the sale of the
Company or of the Newcomerstown facility, any successor employer to recognize
the Union as the Collective Bargaining Representative of its employees, rehire
all employees, and abide by all the terms and conditions of this agreement.
(6) The International Treasurer shall be the sole person to certify the
dues and assessments due to the Union by the employees.
(7) The Union shall indemnify and save the Company harmless from any
claims, suits, demands or other forms of liability that shall arise out of
reliance upon certified list furnished to the Company by the Union for the
purpose of complying with the provisions of this Agreement.
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ARTICLE II
PURPOSE AND INTENT
(8) The purpose of the Company and the Union in entering into this Labor
Agreement is to set forth their agreement on rates of pay, wages, hours of work,
and other conditions of employment so as to promote orderly and peaceful
relations with the employees, to achieve uninterrupted operation in the plant,
and to achieve the highest level of employee performance consistent with safety,
good health, and sustained effort.
(9) The Company and the Union encourage the highest possible degree of
friendly, cooperative relationships between their respective representatives at
all levels and with and between all employees. The officers of the Company and
the Union realize that this goal depends on more than words in a labor
agreement, that it depends primarily on attitudes between people in their
respective organizations and at all levels of responsibility. They believe that
proper attitudes must be based on full understanding of and regard for the
respective rights and responsibilities of both the Company and the Union. They
believe also that proper attitudes are of major importance in the plant where
day-to-day operations and administration of this Agreement demand fairness and
understanding. They believe that these attitudes can be encouraged best when it
is made clear that Company and Union officials whose duties involved negotiation
of this Agreement, are not anti-Union or anti-Company but are sincerely
concerned with the best interests and well-being of the business and all
employees.
ARTICLE III
MANAGEMENT RIGHTS
(10) Subject to the provisions of this Labor Agreement, the Company retains
the right to manage the business and the plant and to direct the working forces.
The Company, in the exercise of its rights, shall observe the provisions of the
Agreement.
The rights to manage the business and plant and to direct the working
forces include but are not limited to the right to hire, suspend, or discharge
for proper cause, or to transfer, and the right to relieve employees from duty
because of lack of work or for other legitimate reasons.
(11) It is agreed that in the exercise of such direction of the working
force, discrimination will not be used against employees.
ARTICLE IV
NON-BARGAINING
UNIT PERSONNEL WORKING
(12) It is agreed that Non-Bargaining Unit Personnel shall not perform work
of the type normally performed by the employees within the collective bargaining
unit, except in cases of emergency, machine development, instructing employees
and developmental experimental work. Developmental experimental work includes
work on developing new jobs or methods, in experimenting with new tooling for
equipment which has previously been placed in service, and
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work on equipment which has not yet been placed in service. Other experimental
work can be performed by Non-Bargaining Unit Personnel providing bargaining unit
employees are present. All violations of this Article will be subject to the
grievance and arbitration procedure and, if found in favor of the Union, the
grievant will be paid for any lost time.
ARTICLE V
WAGES
(13) Section 1. Labor Grades and evaluated base rates under this contract
are effective on the dates as follows:
<TABLE>
<CAPTION>
Labor Grade 4/6/98 4/6/99 4/6/2000
----------- ------ ------ --------
<S> <C> <C> <C>
1 $10.90 $11.25 $11.60
2 $11.40 $11.75 $12.10
3 $11.90 $12.25 $12.60
4 $12.40 $12.75 $13.10
5 $12.90 $13.25 $13.60
</TABLE>
(14) Section 2. SHIFT DIFFERENTIAL
For the purpose of computing shift differentials, the starting time or
the various shifts shall be as follows:
First Shift - 6:00 a.m. to 8:00 a.m.
Second Shift - 2:00 p.m. to 4:00 p.m.
Third Shift - 10:00 p.m. to 12 Midnight
(15) An employee regularly scheduled for the day shift who completes his
regular eight hour shift and after leaving the Company's premises is called back
within the same work day shall be paid the applicable shift differential for the
hours worked on the shift for which he is called back.
(16) An employee regularly scheduled for work and who completes his regular
eight hour shift and continues to work the succeeding shift in excess of four
(4) hours, shall be paid the applicable shift differential for all hours worked
over four in the succeeding shift. An employee regularly scheduled for work on
the third shift and who completes his regular eight hour shift and continues to
work the succeeding shift will carry his applicable shift differential for all
hours worked overtime on the said succeeding shift. For hours worked on the
second shift there shall be paid a premium of 20 cents per hour. For hours
worked on the third shift there shall be paid a premium of 26 cents per hour.
Shift differential shall be included in the calculations of overtime
compensation.
(17) Section 3. INVENTORY PAY. Employees engaged in taking inventory will be
paid the equivalent of labor grade two. All employees however, who operate fork
trucks during inventory will be paid the evaluated CWS rate for such work while
they are assigned to it. Employees who
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volunteer to work in their own department will be given preference to do so by
seniority. Employees who volunteer on a plant-wide basis will be scheduled as
needed. Employees shall, in reverse order of seniority, by required to accept
the scheduled inventory work and will be paid the inventory rate. Probationary
employees may be scheduled for inventory work. It will sometimes be necessary to
take a limited inventory such as steel, stockroom, boxing and shipping supplies,
etc. In such cases the Company will ask in order of seniority, qualified
employees to take such inventory. If enough employees are not scheduled in this
manner the Company will assign the work in reverse order of seniority to
qualified employees. (Determining who is qualified for such limited inventory
the Company and Union shall mutually agree).
(18) Section 4. GRIEVANCE COMMITTEE PAY. When the Company is responsible for
paying for the participation of Union Grievance committee members in regular
grievance committee meetings, grievance committee members will be paid at base
rate. The Company and Union will alternate the responsibility for paying for
their participation in regular grievance committee meetings. The hours so paid
will be excluded from any calculation of average pay for members of the
grievance committee. In an attempt to reduce the number of representatives
attending grievance meetings, the Union will propose a change to their by-laws
that would automatically add the unit chairman to the committee. This change
would insure that there would be no more than five (5) representatives at these
meetings.
ARTICLE VI
HOURS OF WORK
(19) Section 1. The normal hours of work shall be eight (8) hours per day
and forty (40) hours per week. The normal workday shall be eight (8) hours of
work in a 24-hour period. The daily hours of work shall be consecutive except
for such lunch periods as may be provided in accordance with practice heretofore
prevailing in the plant. Nothing in this Article will be construed as a
guarantee of hours of work per day or per week.
(20) Section 2. All employees should be scheduled on the basis of a normal
work week of five (5) consecutive work days Monday through Friday. This section
does not apply to continuous operations. Third shift normal work week will begin
between 10:00 p.m. and midnight Sunday and end between 6:00 a.m. to 8:00 a.m. on
Friday.
(21) Section 3. A - There shall be no change in the daily hours of work
unless such change be first discussed with the Union Committee in an attempt to
secure mutual agreement between the Company and the Union. Both parties have
agreed that during the term of this agreement, the Company may schedule the
Saturday start time to begin at 5:00 a.m.
(22) B - No continuous operations currently exist in the bargaining unit. No
continuous operations will be commenced unless the Union agrees prior to the
initiation of the continuous operation. If a continuous operation is instituted
by the Company without the agreement of the Union, such action will be subject
to the grievance and arbitration procedure.
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(23) Section 4. A - Hours worked in excess of eight (8) in any 24-hour
period shall be paid at time and one-half; provided, however, that in computing
the hours which will be paid for at time and one-half under this provision hours
paid for at regular rates for funeral leave, jury duty, Union business or
reporting pay will be counted as having been worked; provided, further that, in
any event, this provision does not apply where an employee bids to a different
shift or otherwise changes shifts voluntarily. Employees who bid or bump to a
different shift will be moved to their new job on Monday whenever possible.
(24) B - Hours worked in excess of a total of forty (40) hours in a work
week shall be paid at time and one-half. For the purpose of this provision, a
work week is 168 consecutive hours beginning with the starting time of the shift
starting the nearest to 12:01 a.m. Monday.
(25) C - Payment of overtime or premium rates shall not be duplicated for
the same hours worked, but the higher of the applicable rates shall be used.
Hours compensated for at overtime or premium rates shall not be counted further
for any purpose in determining overtime liability under the same or any other
provisions.
(26) Section 5. PREMIUM PAY. Time and one-half shall be paid for work
performed on Saturday and double time for work performed on Sunday as such. This
section does not apply to continuous operations. Premium pay as provided in this
section shall not apply to hours worked on the third shift which begins between
10:00 p.m. and midnight Sunday and ends between 6:00 a.m. and 8:00 a.m. on
Monday. However, premium pay of time and one-half provided in this section will
apply for hours worked on the third shift which begins between 10:00 p.m. and
midnight Friday and ends between 6:00 a.m. and 8:00 a.m. Saturday. A third shift
employee who receives overtime pay for hours worked after the end of his
straight time shift on Saturday, shall not receive the Saturday premium pay
provided in this section for such hours.
(27) Section 6. SUNDAY PREMIUM. All hours worked by an employee on Sunday
which are not paid for on an overtime basis shall be paid at one and one-half
times the employees' evaluated base rate. For the purpose of this provision,
Sunday shall be considered to be the 24 hours beginning with the shift starting
the nearest to 12:01 a.m. Sunday.
(28) Section 7. REPORTING PAY. Employees scheduled to work or who are
notified to report for work and report or report and start to work shall be
guaranteed a minimum of four hours pay at the evaluated base rate of the job
they are currently performing.
An operator who refuses work and requests a pass card due to illness,
may be required to obtain a doctor's certificate (at the Company's expense)
before returning to work.
(29) In all situations (except as defined in paragraphs 31 and 32) when an
employee is assigned (by loaning, transfer, or out of work placement) to another
job, he shall receive the evaluated base rate of his regularly assigned job
title, or the job he is transferred to, whichever is higher. If an employee is
transferred to a job that is a part of a combination job, and that employee is
qualified on all portions of the combination job, they will receive the
combination rate.
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(30) Employees who are requested to return to work after completing their
shift and have left the premises, shall be guaranteed (4) hours of pay to be
paid in the following manner:
a. If an employee is required to work more than (2) hours, all
(4) hours will be paid at one and one-half times their base
rate.
b. If an employee is required to work less than (2) hours, the
first (2) hours will be paid at one and one-half times their
base rate, while the second (2) hours will be paid at their
base rate only.
OUT OF WORK SITUATIONS
(31) After the first four (4) hours, out of work employees will receive the
evaluated base rate of his regularly assigned job, or the job he is assigned to,
whichever is higher. If an employee opts to go home after (4) hours, he will be
subject to the rules of the absentee policy.
DOUBLE LOANS
(32) After the first four (4) hours, any employee who is being double loaned
will have the option of continuing with the present transfer at the higher of
the two base rates, or, if his regular job is still occupied, he may refuse the
transfer/loan and go home for the remainder of the day.
(33) Employees refusing any job during the first four hours will not receive
the benefits of the four-hour guarantee.
(34) It is agreed that the Company shall not be liable for such guaranteed
reporting pay if the failure to supply work is due to fire, flood, storm or
other Acts of God, sabotage, power breakdown, or major mechanical breakdowns
beyond the control of the Company. In any event, the Company will make a
reasonable attempt to contact the employees involved to preclude their reporting
to work. The attempt will be verified by another person when practical.
(35) Section 8. SATURDAY WORK AND DAILY OVERTIME.
A - The Company will post a sign-up sheet for Saturday Work, by
department, by 1:00 p.m. Wednesday in each week it anticipates requiring
Saturday work. Each employee who desires to work on Saturday must sign the list
before 8:00 a.m. Thursday and indicate whether he wishes to work only on the job
number he is working by bid, bump, or placement, or whether he will accept any
job in the department for which he is qualified. The Company will remove the
sign-up sheets between 8:00 a.m. and 9:00 a.m. Thursday and thereafter schedule
employees for Saturday work in the following order:
(36) 1 - Employees who have indicated on the sign-up sheet that they will
work on their job number will first be assigned to work the machines they are
working by bid, bump or placement at the time they are scheduled on their
regular shifts on Saturday if these machines are scheduled;
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provided, however, that employees will be assigned under this subparagraph
according to seniority, most senior employee regardless of shift first, and that
each employee will be assigned to his regular shift if possible.
(37) 2 - Employees who have indicated on the sign-up sheet they will work on
their job number but who are not assigned under subparagraph (1) will be
assigned to Saturday work on their job number if such work is scheduled;
provided that employees will be assigned under this subparagraph according to
seniority, most senior employee regardless of shift first, and that each
employee will be assigned to his regular shift if possible.
(38) 3 - Stand-in operators who have indicated on the sign-up sheet that
they will work on their job numbers will be assigned to Saturday work to any job
they have previously performed within their job number; provided that employees
will be assigned under this subparagraph according to seniority, most senior
employee regardless of shift first, and that each employee will be assigned to
his regular shift if possible.
(39) 4 - The Company will assign Saturday work which is not assigned under
subparagraphs (1), (2), or (3) to any employee in the department who is
qualified to perform the work and who has indicated on the sign-up sheet that he
will accept such assignment; provided that employees will be assigned under this
subparagraph according to seniority, most senior employee regardless of shift
first, and that each employee will be assigned to his regular shift if possible.
(40) 5 - If all Saturday work is not assigned under subparagraphs (1), (2),
(3) and (4), the Company may, at its option, assign such work to the least
senior unscheduled employee in the department, regardless of shift, who holds
the job number by bid, bump or placement. Any employee assigned to work under
this subparagraph must work, except as provided in paragraph C.
(41) First shift employees will be notified they are scheduled for Saturday
work not later than 3:30 p.m. Thursday of that week. Second shift employees will
be notified they are scheduled for Saturday work not later than 7:30 p.m.
Thursday of that week. The Saturday overtime schedule will be posted in (3)
areas: (1) Main Entrance Bulletin Board, (2) Bulletin Board outside Control #2
office, and (3) Bulletin Board between Dept. #4 and Dept. #7.
(42) If an operator has been bypassed for Saturday overtime, he must notify
his supervisor of the error on Thursday or Friday. If the decision is still not
to work that employee, and it is later proven that he was entitled to the
overtime, he will be awarded the corrective pay. If however, an employee waits
until Monday to notify the Company that he was bypassed, and it is determined
that he is correct, this employee will work the next nonscheduled available
overtime that is convenient for both the employee and the Company.
(43) When an employee signs the sign-up sheet but is then absent on Thursday
and Friday, he must call his supervisor for notification of work. If he is told
that he is not scheduled and it is later determined that he was entitled to
work, he will be awarded the respective overtime pay.
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(44) An employee who is off for Union business must give advance
notification to his supervisor of his intention to work weekend overtime. With
such notice, this foregoes signing of the sign-up sheet.
(45) B - Assign daily overtime by seniority to the person who has the job by
bid, bump or placement. This applies only when the employee has previously
performed work on the job in question. If not assigned in this manner, then
require the least senior employee in the department who holds the job by bid,
bump or placement.
(46) Employees are responsible for notifying their supervisor of all work
centers within a job number that they have previously performed. The supervisor
will then confirm their qualifications. In the event of a disagreement, attempts
will be made by the employee, shop steward, and supervisor to resolve any
differences.
(47) Employees will be notified they are scheduled for daily overtime the
day before the overtime is required except in an emergency.
(48) C - Any employee scheduled for Saturday work or daily overtime under
paragraphs A or B of this Section who does not report for work or does not work
the full scheduled period will be subject to discipline, unless excused by his
foreman or other member of management for a legitimate personal reason which
would result in an undue hardship. No other excuse is necessary if a doctor's
certificate showing personal or family accident or illness is presented by such
employee. Immediate family is as defined in Article VII, Section 2. If a
scheduled employee is excused under this paragraph or fails to report on
Saturday, the Company shall have the right to schedule any employee it chooses
without regard to other provisions of this Section.
(49) D - Sunday work, if required, shall be subject to the same procedures
set forth in this Section for Saturday work.
(50) E - In the interest of insuring that the proper employee is scheduled
for overtime, the department stewards and the Union Committee will cooperate
with the Company to insure proper scheduling. The Company will make every effort
to schedule overtime work to correspond with planned production needs.
ARTICLE VII
ALLOWED HOURS
(51) Section 1. ALLOWANCE FOR JURY DUTY. A non-probationary employee who is
called for jury service or subpoenaed as a witness shall be excused from work
for the days on which he serves and he shall receive for each day of service as
a juror or witness, on which he otherwise would have been scheduled to work, the
difference between 8 times his evaluated base rate and the payment he receives
for such service, subject to the provisions listed below. Time off from work in
order for an employee to give a deposition will not be paid under this
provision. If a second or third shift employee is summoned for jury duty in
either Guernsey, Tuscarawas, or
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Coshocton County, and is excused by the courts by 11:00 a.m., they must report
to work at the normal start time.
(52) A - The employees must notify their supervisor as soon as possible
after receipt of notice of selection for jury service or to serve as a witness.
(53) B - The employee will present proof of service and the amount of pay
received therefore.
(54) Section 2. ALLOWANCE FOR FUNERAL LEAVE. Three days funeral leave will
be guaranteed to non-probationary employees (upon request) in case of death of
the employee's mother, father, sister, brother, mother-in-law, father-in-law,
brother-in-law, sister-in-law, son-in-law, and daughter-in-law, in immediate
marriage relationship, grandchild or grandparent of the employee or his spouse,
or when they have lived with the employee in an immediate family relationship,
the employee's stepmother, stepfather, stepbrother, and stepsister in order for
the employee to attend the funeral. It is understood that a brother-in-law or
sister-in-law of an employee in the immediate marriage relationship will be
defined as an employee's brother or sister's spouse, or an employee's brother or
sister and his or her spouse. (4) days will be granted (upon request) in case of
death of the employee's legal spouse, son or daughter, including stepchildren
(when they have lived with the employee in an immediate family relationship).
(55) All funeral leaves shall be taken on consecutive scheduled working days
provided that one such scheduled working day shall be the day of the funeral and
it is established that the employee attended the funeral.
(56) For those funeral leaves which are limited to three days, employees may
have as their last day the day of the funeral or the day following the funeral
at the employees option.
(57) For each day of such authorized leave, the Company will pay for the
normally scheduled hours not exceeding eight (8) at the employee's previous
week's pay performance. Proof may be required by the Company of the relationship
and that the funeral was attended by the employee; if not attended, or if the
requested proof is not forthcoming or satisfactory, there shall be no
eligibility for any funeral leave pay. Funeral leave pay shall not apply to
Saturday, unless scheduled to work, Sunday, observed holidays set forth in
Article XII, time when the employee is on vacation, any period when the employee
is eligible for Workman's Compensation or nonoccupational disability benefits,
or when it duplicates pay received for time not worked for any other reason.
(58) Section 3. INJURY AT WORK. Any employee who may be injured while
engaged in work properly assigned to him and who must leave work because of the
injury shall receive pay at his evaluated base rate for the balance of the
regularly scheduled shift on which he is injured.
(59) The employee shall normally visit a Doctor immediately upon leaving
work. If this is not practical due to the hour of the day or night or for other
legitimate reasons, he shall visit a Doctor as soon as possible after leaving
work. Upon return, he shall bring a statement from the Doctor specifying the
injury and extent of the injury and that he is physically able to perform his
job.
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ARTICLE VIII
LEAVING DEPARTMENT
(60) All employees are required to remain in their respective departments
during working hours unless permission is granted to go into another department
or they are required to do so due to the nature of their work. Union
Committeemen and Officers of the Local shall have the right to go into other
departments for reasonable periods of time on legitimate Union business.
However, so that there is no interference with orderly operations, they must
obtain permission from their supervisor before leaving the department and must
record their name, the time they leave, and the time they return on a sign-out
sheet.
ARTICLE IX
SENIORITY
(61) Section 1. SENIORITY STATUS OF EMPLOYEES. An employee's seniority shall
be his total continuous unbroken service with the Company since his last date of
hire.
(62) The parties recognize that promotional opportunities and job security,
in event of promotions, decreases of forces and rehiring after lay-offs, should
be increased in proportion to length of continuous service, and that in the
administration of this Article the intent will be that, consistent with the
provision of this section, full consideration will be given continuous service.
(63) In recognition, however, of the responsibility of the Company for the
efficient operation of the plant, it is understood and agreed that in all cases
of:
(64) A - Promotion (except promotions to positions not included in the
categories represented by the Union, as set forth in Article I, Section 1) - the
factors listed below shall be considered; however, only where factors "a" and
"b" are relatively equal shall length of continuous service be the determining
factor:
(65) 1 - Ability to perform the work.
2 - Physical fitness.
3 - Continuous service.
B. Decreases in forces or rehiring after layoff - the factors listed
below shall be considered; however, only where both factors "a" and "b" are
relatively equal shall continuous service be the determining factor:
1 - Ability to perform the work.
2 - Physical fitness.
3 - Continuous service.
(66) C - In the operation of A, "Promotions" and B, "Decreases in forces or
rehiring after lay-off", above, it is agreed that Management may pass over an
employee with greater seniority
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when in its opinion the employee does not possess the apparent qualifications to
perform the duties of the job in question in a satisfactory manner. If the
Company desires to pass over an employee, with greater seniority, it must first
notify the Chairman of the Grievance Committee or his designee. The Union
Committee will have the right to have a meeting with the Company to consider the
matter prior to such action being taken. It is agreed that if the Union
Committee shall insist, the employee with greater seniority who has been passed
over shall be given a trial period not to exceed thirty (30) working days to
perform the job in question in satisfactory manner.
(67) D. Differences arising under this Section and not resolved as provided
herein, may be processed through the grievance procedure.
(68) Section 2. SENIORITY LISTS. A master seniority list will be made
available to employees showing all employees' seniority. A copy of this master
list will also be furnished to the Local Union Committee as often as one is run
by the Company, at least once every six (6) months. The Union will supply the
Human Resources Department with a list of Union Officers and Stewards and will
provide prompt notification of any changes.
(69) Section 3. LOSS OF SENIORITY. Seniority shall be lost (and any
subsequent rehire shall be as a probationary employee) as follows:
(70) A. When an employee quits.
(71) B. When an employee is discharged for just cause.
(72) C. When an employee is absent for three (3) working days without
notifying the Human Resources Department unless failure to make notification can
be verified (by doctor's certificate) as having been caused by personal
sickness, accident or death in the immediate family.
(73) D - Failure to report intentions and availability within five (5)
working days after being called back; failure to report for work within ten (10)
days after written notice. Normally call backs will be made by telephone or
other direct means. If these attempts are not successful the call back will be
made by certified mail, return receipt requested, with a copy to the Union. The
call back will be sent to the last address supplied by the individual to the
Human Resources Office.
(74) E - Failure to return to work the work day following the expiration of
a leave of absence.
(75) F - If an employee shall be absent because of layoff or physical
disability, he shall continue to accumulate continuous service during such
absence up to a maximum of two (2) years, and he shall retain his accumulated
continuous service for an additional period equal to (a) three (3) years, or (b)
the excess, if any, of his length of continuous service at a commencement of
such absence over two years, whichever is less; provided, however, that in order
to avoid a break in service after an absence of two (2) years, the employee must
give the Company annual written notice that he intends to return to employment
when called, if the Company, at least 30
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days prior thereto, has mailed him a notice at the most recent address furnished
by him to the Company that he must file such notice.
(76) G - When an employee is jailed or imprisoned for a period in excess of
ninety (90) days.
(77) H - Upon the receipt by the Company of a second wage garnishment
relating to a separate debt within a 12 month period beginning with the date of
the first garnishment and upon the failure of the employee to obtain and
present to the Company a written statement releasing the Company from any
obligation under the garnishment to make a deduction from the employee's pay.
(78) Section 4. FILLING JOB VACANCIES.
(A) When a job is vacant because a probationary employee quits, is
discharged or dies within the first 15 working days of his probationary period,
the Company may, in its discretion and without regard to Section 1 of this
Article, fill the vacancy with another probationary employee or a new hire or by
placing an employee who agrees with the placement.
(79) (B) When the Company desires to fill a job (other than a temporary
opening), the following steps will be taken:
1. Bid holders of the job anywhere in the plant will be
recalled to such job in order of seniority.
2. If there is no internal bid holder for such initial
opening, the job shall be posted for bid.
3. The secondary opening resulting from either No. 1 or
No. 2 above shall be filled in the same fashion.
4. The third opening will be posted and awarded to
employees who bid, in the following manner: The job
will be awarded first to a qualified bidder who has
previously performed the job, then if there are no
qualified bidders, award to the senior bidder. If not
one bids, the Company shall call back an employee
from layoff, if applicable or fill the job as
described in Paragraph #85 (F). Further openings will
be filled by recall or by Paragraph #85 (F).
5. If an employee recalled to an open job from the
lay-off panel shall move from that job permanently
after 30 working days the procedure outlined in No. 1
and No. 2 above will be followed, otherwise the
procedure in Step 4 above will apply.
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(80) (C) Open jobs which are posted under paragraph (B) of this Section will
be posted for bid for 24 hours at the main entrance. All bids must be deposited
in the Bid Box at the main entrance.
(81) (D) (1) Individuals on the lay-off panel and employees with fewer than
six months seniority are not eligible to bid on posted jobs. Limitation on
bidding shall not be extended to employees on A&S or Workers Compensation, or
off for other reasons, unless they are released to report for work at the time
the bid is awarded.
(82) (2) Employees shall be awarded not more than (2) bids in a contract
year. In order to be deemed a successful bid, the employee must have occupied
the bid job. If he is displaced by a bump before occupying his bid job, that bid
will not be counted.
(83) (3) The limitation on bidding stated in paragraph (2) will not apply to
job vacancies which the Company designates as qualifying for an exception
because the vacancies are for jobs to be worked on new equipment which is
significantly different than any other equipment in the plant (not merely new
models of old equipment). This exception will apply to such new equipment only
the first time a vacancy is posted for bid.
(84) (E) Bids will be awarded the posted job in accordance with Section 1 of
this Article to employees anywhere in the plant.
(85) (F) Jobs not filled by the above steps will be filled as follows:
1. By placement of the least senior employee in the
plant, or
2. By placing a probationary employee or hiring a new
employee without regard to Section 1 of this article.
(86) (G) A bid may be withdrawn after deposit in the bid box but before the
bid is awarded by use of the appropriate form. Bidders must accept the job if it
is awarded to them. Once the Company awards a job to an eligible bidder, the
Company cannot void the bid unless it is found to be in conflict with other
provisions of the contract.
(87) (H) An employee who bumps to a job or fills it under this Section and
who is not capable, either because of lack of qualifications or physical
condition, to perform the duties of the job satisfactorily within a reasonable
trial period not to exceed thirty (30) days worked (unless extended by mutual
agreement between the Union Committee and Management), shall place a bump. No
employee can disqualify himself on a job to which he has bumped or filled under
this Section.
(88) (I) The employee having the greater seniority will be entitled to shift
preference where his same job is operating more than one shift. Before
exercising seniority for shifter preference, an employee must have continued on
his present job and shift for a continuous period of at least three (3) months.
An employee displaced hereby will assume the job and shift vacated by the
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senior employee or shall be entitled to immediate shift preference within the
same job number based on his seniority. The changes shall take place on the
following Monday provided the employee notifies his foreman prior to the
previous Thursday.
(89) (J) Nothing in this Article requires the Company to fill a job with an
employee who has been previously disqualified; however, an employee who was
disqualified from a job more than five years prior to the time it is posted for
bid may nevertheless be considered for that vacancy as provided in this article.
(90) Section 5. FILLING TEMPORARY JOB VACANCIES. In the event of a vacancy
created by prolonged sickness, accident, leave of absence, or other unforeseen
circumstances under which a job would be vacant for a period longer than 30
working days, such open job will be put up for temporary bid if there is a
requirement to fill the job. The procedure followed on temporary bids will be
that outlined in Section 4 of this article.
(91) These bids are temporary in nature and the person awarded such a bid
will exercise his seniority when the incapacitated employee returns to work on
that job. This shall apply in all cases even when the temporary bidder is a more
senior employee than the employee who originally vacated the job. However, when
an incapacitated employee returns to work to another job, the temporary bid
holder may bump or retain the job at his option.
(92) It is understood that only the job of the incapacitated employee will
be filled by temporary bid. Should the incapacitated employee fail to return to
work, the temporary bid will automatically become permanent and so recorded on
the employment record.
(A) It is also understood that the Company may, at it's
discretion, establish and fill temporary light duty jobs for the purpose of
providing such work for employees who have medical restrictions. Such temporary
positions will be paid Labor Grade #1 wages and will not be available as an
option in the normal bidding and bumping procedures, since they are not
permanent positions. The Company agrees to discuss the creation of such jobs
with the Union prior to filling the position, and will also provide prior
notification when an employee is added to the position. Nothing in this
Agreement is intended to displace an active employee from his regular job. These
jobs will be graded according to the C.W.S. Job Evaluation System and paid
according to the contractual wage agreement. In the case of a reduction in the
work force, the Company will not retain any temporary light duty employees that
are junior to other active employees.
(B) LIGHT DUTY RESTRICTIONS
1. Light Duty to perform no overtime.
2. Light Duty to work no more than (10) days/month on a bid job.
3. If Light Duty works more than (10) days/month on a bid job,
the job must be posted for bid.
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4. The Company will provide the Union with copies of jobs
performed by Light Duty employees on a bi-weekly basis.
(93) Section 6. LAY-OFF.
(A) In all situations involving layoff of more than one (1) day,
the provisions of Section 1 of this Article shall apply.
(94) (B) In the event an employee is to be laid-off, the following
procedures shall be followed:
(1) Employees who are laid-off from a job, may bump a less senior
employee whose job his record shows he is qualified on;
provided he can requalify with minimal training of (2) weeks
or less.
(95) (2) An employee not placed in (1) above, must first take an open
job that he is qualified on. Then, if not placed in this
manner, he has the option of choosing an open job or bumping
the least senior employee.
(96) (3) Employees laid off from the plant will be placed in a layoff
panel.
(97) (4) In order to be eligible to bump to a job, an employee must
have performed 50% of the old job reference numbers of that
job through a previous bid, bump, or placement for at least
thirty (30) working days, or a loan for 20 working days in a
three (3) month rolling period, as shown on his employment
record.
(98) In the loan situation above, the employee is to keep track of the 20
working days in the (3) month rolling period, and in order for a
reclassification slip to be completed, the employee must notify the Company of
this qualification within (5) scheduled days after the completion of the 20-day
period. An employee must work 3 1/2 hours on a job to have it count as a day.
(99) (C) When an employee is notified by management that he is being
laid off or bumped, he shall then have the right to bump. Such bump shall
thereafter be recorded on his employment record.
(100) (D) An employee laid off from the plant will accumulate seniority
to the extent provided in Section 3, Paragraph F of this Article.
(101) (E) After an employee is notified that he is being bumped or
laid-off, he must exercise his seniority rights within (3)
hours of such notice, unless one of his options is to change
shifts, then he may have until the beginning of his next
scheduled shift.
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(102) (F) No seniority rights shall be exercised in the case of a layoff
of one (1) working day or less, if such exercise of seniority
rights would involve displacing another employee from his or
her job. Seniority rights may be exercised in the case of a
layoff of more than one (1) day.
(103) (G) In out-of-work situations, seniority will be the governing
factor only in the departments of their supervisor's area of
responsibility. If there is no work in these areas, a
reasonable effort will be made plantwide to find work for the
employee.
Section 7. TRANSFERS.
(104) (A) TRANSFERS OUT OF BARGAINING UNIT.
(105) (1) All employees who are transferred by the Company to jobs not
included within the bargaining unit shall accumulate seniority
in the bargaining unit for the first six months they remain in
Company service outside of the bargaining unit. At the end of
such period, they shall neither accumulate further seniority
nor retain their seniority in the bargaining unit.
(106) (2) During the period in which seniority is being accumulated,
such transferred employee shall have the right to transfer or
bump back to a job he has previously performed in the
bargaining unit in accordance with the provisions of Article
IX, Section 6. After an employee has once re-transferred back
into the bargaining unit and then later transfers out, he will
thereupon lose his seniority in the bargaining unit.
(107) (B) DISABILITY TRANSFER. An employee's request for transfer due to
physical disability accompanied by a Physical Limitation
Certificate (Form 269), signed by a Physician, will be
referred to the Human Resources Department. If an open job
exists, the Company may elect to place the employee on the
job, as long as it fits his limitations.
(108) (C) LACK OF SKILL OR PHYSICAL ABILITY TRANSFER. An employee who,
by reason of lack of necessary skills, dexterity or physical
ability, consistently fails to perform the duties of his job
satisfactorily after a reasonable period of time may be
disqualified and may exercise his seniority to bid or bump.
(109) (D) PERMANENT TRANSFER OF JOB OR MACHINE. In the event of a
permanent transfer of a job from one department to another,
the employees working on such jobs must transfer with such
jobs. In the event of the permanent transfer of a portion of a
job from one department to another, the employee working on
such jobs must transfer with such jobs providing the portion
of job transferred constitutes at least 50% of the job in the
department to which transferred.
(110) (E) ELIMINATION OF DEPARTMENT. In the elimination of a department,
employees displaced thereby will exercise their seniority as
provided in Article IX, Section 6, Sub-Section B.
(111) Section 8. REASSIGNMENT WITHIN A JOB NUMBER. In the event of lack of
work on an employee's assigned machine or work station, or in the event work is
not required on an employee's assigned machine or work station, such employee
may be reassigned within the job
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number. After being reassigned for a period of five (5) working days the
employee may exercise his seniority to select the work station of his choice
within the job number.
(112) Section 9. PROBATIONARY EMPLOYEES. New employees shall be considered
probationary employees for the first 55 working days they work for the Company.
Probationers may be discharged with or without cause and such discharge shall
not be recognized for the basis of filing of a grievance. Probationers may be
shifted about at the will of the Company. If a probationer is retained in
employment after 55 working days, the job number to which he is placed will be
considered his bid in job and his seniority shall date from date of hire.
Employees with Company service shall have preference at all times over
probationary employees.
(113) Section 10. PROGRESSION OF MACHINISTS AND DIE MAKERS. In order to
reflect a proper line of progression for the Machinists, it is necessary to
develop a program which will, in a given time, qualify such employees so that
they may complete a training which will entitle them to the classification of
Machinist A. Therefore, the following procedure shall be adopted as a standard
schedule to determine the employees' advancement and rate of pay. Employees will
begin at Labor Grade (4) and move to Labor Grade (5) when fully qualified as
Class A.
(114) It is agreed that for the purpose of upgrading or reclassification, the
six machines shall be Shaper, Lathe, Planer, Milling Machine, Bandsaw and Radial
Drill which must be operated efficiently and the work produced must be to the
proper dimensions and precision.
(115) A Machinist C must have performed the duties required and produce
satisfactory results on at least three (3) of the above machines before he will
be upgraded to a Machinist B.
(116) A Machinist B must have performed all of the operations and operated
all of the equipment pertaining to the Machinist's classification satisfactorily
before he will be upgraded to Machinist A. A Machinist B who has served twelve
(12) months in the Machinist B classification shall have his qualifications
reviewed for advancement to Machinist A. If fully qualified for Machinist A he
shall be so advanced.
(117) Bidding as such will be eliminated and the employees will be moved
along from one rate to another and from one class to another and from one
machine or job to another at the discretion of the Supervisor depending upon
their skill, dependability, accuracy, experience, etc., and the Company's need
of them. This is the responsibility of the Management and is subject to the
grievance procedure.
(118) In order to reflect a proper line of progression for the Die Makers, it
is necessary to develop a program which will in a given time, qualify those
employees so that they may complete training which will entitle them to the
classification of Die Maker A.
(119) Therefore, the following procedures shall be adopted as a standard
schedule to determine the employee's advancement and rate of pay. Employees will
begin at Labor Grade (4) and move to Labor Grade (5) when qualified.
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(120) It is agreed that for the purpose of upgrading or reclassification of
Die Profile and Shaper Operator and Die Scraper and Fitter will be the
determining factor, which must be operated efficiently and the work produced
must be to the proper dimensions and precisions.
(121) A Die Maker C must have performed either the Die Profile and Shaper
Operator or the Die Scraper and Fitter operations with satisfactory results
before he will be upgraded to Die Maker B.
(122) A Die Maker B must have performed all of the operations and operated
all of the equipment pertaining to the Die Making Process satisfactorily before
he will be upgraded to Die Maker A. A Die Maker B who has served twelve (12)
months in the Die Maker B classification shall have his qualifications reviewed
for advancement to Die Maker A.
(123) If fully qualified for Die Maker A he shall be so advanced. Bidding as
such will be eliminated and the employee will be moved along from one rate to
another and from one class to another and from one machine or job to another at
the discretion of the Supervisor, depending upon their skill, dependability,
accuracy, experience, etc. and the Company's need of them. This is the
responsibility of the Management and is subject to the grievance procedure.
(124) Class C Die Maker or Machinist will remain in that classification for a
period not to exceed nine (9) months unless prior to the end of that time, the
Company can show just cause as to his lack of qualifications.
(125) In the event of a lay-off, employees in the Trainee C classification
will be laid off first according to their seniority in that classification and
so on up the line.
(126) Section 11. SKILLED CRAFTSMAN. Bids for skilled craftsman jobs will be
posted provided there are no bid holders to be recalled in the plant. All bids
will be considered and awarded in this priority:
1. The most senior qualified bidder. Qualified in this
instance means he has performed one-half of the averaged time
requirements as identified in the C.W.S. Job Description
category of Employment Training and Experience.
2. If no qualified bidders, then all other bids will be
considered and the job awarded to the bidder, who in the
Company's opinion, is the most qualified by training and
experience to perform all job requirements or in the Company's
opinion, could perform all job requirements after a reasonable
break-in period. No employee may bump into any of the skilled
craftsman's jobs listed below unless he has previously been
classified in that job in this plant and is now capable of
performing all job requirements.
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(127) The skilled craftsman's jobs referred to are as follows:
Dept. No. 1 Maintenance and Set-Up Man
Dept. No. 3 Maintenance and Set-Up Man
Dept. No. 3 Surface & Die Grinder, Maintenance and Set-Up Man,
and Fork Truck
Dept. No. 4 Department Machine Maintenance Man; Department
Machine Maintenance Man and Laborer
Dept. No. 9 Department Machine Maintenance Man; Department
Machine Maintenance Man; Chisel, Grinder, Dresser,
Deliverer
Dept. No. 16 Half Round Machine Maintenance Man
Dept. No. 20 Machine Maintenance Man; Vixen Cutter, Grinder,
Utility and Laborer; Maintenance Man
Dept. No. 26 Maintenance and Set-up Man; Maintenance and Set-up
Hardening Truck Driver and Laborer
Dept. No. 38 Metallurgist
Dept. No. 41 All Jobs
Dept. No. 42 All Jobs except Janitor and Laborer
Dept. No. 42 Waste Water Treatment Operator
Dept. No. 43 All Jobs
Dept. No. 49 All Jobs
Dept. No. 49 Die Hardener, Stamp Maker, Vixen Cutter, Grinder,
Utility and Laborer
(128) In the event a skilled job is not filled by the present bidding and
bumping procedure, the oldest qualified employee will be called back from the
lay-off panel. If there are no qualified employees on the lay-off panel, the job
will be filled otherwise by the Company.
(129) To be considered qualified an employee must have performed the job in
this plant or be qualified by training or other experience so that in the
Company's opinion he can perform the job.
(130) Trainee C openings in Die and Machine Shops will be posted for bid. The
Trainee C job will be filled with these bidders without regard to seniority. If
in the Company's opinion, there are no qualified bidders, the job will be filled
otherwise by the Company.
(131) Skilled Craft employees shall perform no more than 5 days/month of
production work.
(132) Section 12. RECLASSIFICATION SLIPS. Reclassification slips shall be
marked by the following symbols on each change of job or operation: Placed,
bump, bid, recall, loan for 20 working days in a three (3) month rolling period,
shift change or call back. Copies of reclassification slips will be supplied to
the Union Steward or a Union Committee member.
(133) Section 13. Nothing in this Article shall be construed or applied in
such a manner as to interfere with production or increase the cost of production
except as required under the provisions of this Agreement.
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ARTICLE X
DEPARTMENTS IN THE PLANT
(134) The departments in the plant area are as follows:
1 Shearing/Annealing 23 Hardening
2 Forge 24 Alox/Steam Sharpener
3 Punch Press 26 Finishing
4 Grinding 29 Wrap, Stamp & Box
5 Stripping 38 Laboratory
7 Edging 39 Stockroom
8 Gang Edge 40 Inspection
9 Cutting 41 Elect. Maint.
11 Saw Files 42 Maintenance
13 Rasp 43 Machine Shop
15 Swiss 48 Chisel Grinding
16 Half Round 49 Die Shop
18 Round 52 Testing
19 Round File Cutting 80 Shipping
20 Vixen
21 Crop & Straighten
ARTICLE XI
LEAVE OF ABSENCE
(135) Section 1. UNION LEAVE OF ABSENCE. Any Local Union or Unit Committee
member and officers, who are employees of the Company, shall be given, on his
request, a leave of absence for a one year period, not to exceed a maximum of
three one-year periods, in the course of his employment, for the purpose of
working for the Local Union or the International Union. Such a leave of absence
shall not constitute any break in the employee's record of continuous service.
Upon written request to the Company, such an employee may be granted an
extension of his leave of absence upon mutual agreement between the Company and
the Union.
(136) Section 2. GENERAL LEAVE OF ABSENCE. A leave of absence for compelling
or justifiable personal reasons made in writing may be granted at Company
discretion for periods up to six months and may be extended for further periods,
if request is made in writing, up to maximum total continuous leave periods of
two (2) years. If the individual does not return to work after expiration of a
leave or receive a renewal, seniority shall be lost. The Union will be notified
of each leave of absence granted an employee in its bargaining unit.
(137) Upon written requests by the Union, the Company will grant, if
operating conditions permit, leaves of up to two weeks to no more than five
employees in any calendar year for the purpose of attending Union district
conferences or International Union conventions.
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(138) Any request for days off for Union Business shall be submitted in
writing to the Human Resources Department at least one day prior to the desired
date and shall not exceed 15 days per calendar year for any one employee.
Conferences, conventions, negotiations, and workers' compensation hearings are
exempted from the (15) day calculation but still require written notification of
time off.
ARTICLE XII
HOLIDAYS
(139) The Company will pay employees within the bargaining unit for (11)
eleven holidays not worked in a year. An employee eligible under these
provisions shall receive eight hours straight time pay at his previous weeks pay
performance including shift differential.
The eleven holidays are:
New Year's Day
Good Friday
Memorial Day
Fourth of July
Labor Day
Thanksgiving
Day after Thanksgiving
Day before Christmas
Christmas
December 31
Floating Holiday
(140) The floating holiday may be scheduled at any time during the year
pending prior supervisory approval.
(141) The employee must be a regular employee on the active payroll of the
Company as of the date of the holiday. Probationary employees are not entitled
to receive holiday pay for holidays not worked.
(142) The employee must be actively employed and would have been scheduled to
work if the day had not been observed as a holiday.
(143) The employee must work his last scheduled work day prior to and his
next full scheduled work day after such holiday within the employee's scheduled
work week unless excused by the foreman. However, payment for the holiday will
be made if the employee worked during the week prior to, or the week in which
the holiday occurs, but is absent on the above day due to union activity,
illness or accident (verified by Doctor's Certificate), emergency illness at
home, authorized funeral leave as defined in paragraph (48), or jury duty, or if
he has been sent home for lack of work.
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(144) If any of these Holidays fall on a Saturday, observance will be on the
previous scheduled work day. If any of these Holidays falls on a Sunday,
observance will be on the next scheduled work day.
(145) Should any holiday fall during the scheduled vacation period, this
holiday will be paid for in addition to the vacation pay and the employee may
extend his vacation for an additional day without pay if he makes arrangements
in advance to do so.
(146) If the Company requires an employee to work on a holiday, he will be
paid double time for holiday worked plus one (1) day at his regular average rate
for the holiday, straight time, hourly rate for day workers. This does not apply
to continuous operations.
ARTICLE XIII
VACATION
(147) Section 1. ELIGIBILITY.
(A) Each employee will be eligible for vacation with pay within a
calendar year, based on the number of years of service he will complete within
the calendar year, as follows:
<TABLE>
<CAPTION>
Years of Service Wks. Vacation With Pay
---------------- ----------------------
<S> <C>
1 but less than 3 1
3 but less than 10 2
10 but less than 17 3
17 but less than 25 4
25 or more 5
</TABLE>
(148) Any employee who does not complete one year's service with the Company
will not be entitled to vacation or vacation pay.
(149) (B) The vacation year will be the period between Calculation Dates
in sequential years. The vacation qualifying period will be the 12 months
preceding the vacation year.
(150) (C) To be eligible for a vacation in any vacation year during the
term of this Agreement, the employee must:
(a) Have one year or more of continuous service
(b) Have had earnings in at least 50% of the pay periods in the
vacation qualifying period.
(151) (D) Any employee with more than one year of continuous service who
is ineligible for a vacation because of failure to have earnings in at least
50% of the pay periods in the vacation qualifying period due to layoff or
sickness shall be entitled to one week's vacation, if he has had earnings in at
least 50% of the pay periods in the twelve (12) months preceding January 15 of
the
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vacation year. An elected Union official may count time off work on Union
business towards a portion of the said 50% of pay periods.
(152) Section 2. PAYMENT DATE AND CALCULATION DATE DEFINED.
(E) A Calculation Date will be determine each year which will be
the earlier of (1) the pay day three weeks prior to the scheduled vacation
shutdown, if any, or (2) June 25. Vacation eligibility and payment calculation
will be made as of the Calculation Date for all employees.
(153) (F) Each employee who has not completed one year of service by the
Calculation Date will not become entitled to vacation or to the vacation pay
calculated for him at the Calculation Date until he completes one year's service
with the Company. At the time he completes one year's service, whether in the
same year of the Calculation Date or the next, he will become entitled to one
week's vacation in the calendar year of his anniversary date and to vacation pay
calculated at the Calculation Date and payment will be made by the third payday
following the anniversary date.
(154) Section 3. VACATION PAY.
(G) The vacation pay will be based on 40 hours per week and will
be at the employee's average straight time hourly rate (including shift premium
but excluding overtime) based on the period between January 1 and May 31
preceding the vacation year.
(155) Section 4. CALCULATION FOR EMPLOYEE'S INCREASED VACATION SERVICE YEARS.
(H) Employees who complete their third, tenth, seventeenth or
twenty-fifth (when applicable) years of service during the calendar year but
after the Calculation Date applicable to them in that year will have their
vacation calculated on the Calculation Date as if they had completed their
third, tenth, seventeenth, or twenty-fifth (when applicable) year of service,
respectively. However, the additional vacation pay and the additional week of
vacation to which they will become entitled by reason of completion of the
required years of service will be deferred until the employee's anniversary date
and payment for the additional week will be made by the third payday following
the applicable anniversary date. At the time they reach their anniversary date
they will be eligible for the additional week of vacation. Eligibility for the
additional vacation and vacation pay will be lost if the employee does not
complete the required years of service.
(156) Section 5. VACATION SHUTDOWN. The Company will notify the Union prior
to February 1, whether or not there will be a vacation shutdown in that calendar
year. The date and duration of the shutdown, if any, will be made known on or
before March 15. The vacation shutdown will be scheduled in June, July or
August. Such shutdown shall be considered vacation for all eligible employees
not scheduled to work during this period. The Company reserves the right to
schedule necessary maintenance and other employees during this vacation period,
and such employees shall be scheduled for vacation at another time. In the event
there is to be no vacation shutdown, vacations will be scheduled in accordance
with production requirements and the
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desires of the employees on a seniority basis. If the plant is to be shut down
for vacation, the Company will endeavor to provide work for those employees who
are not entitled to vacation pay, but without any obligation to do so and with
regard to seniority.
(157) Section 6. DEATH. In the event an employee with more than one year's
seniority dies and the employee has not met the eligibility requirements for a
full vacation benefit in that year, the date of his death will be used as a
calculation date for that employee and his estate shall be paid an amount equal
to 40 hours, for each week of vacation eligibility times the average rate per
hour used to calculate his last regular vacation pay (adjusted for any
intervening wage increases) times a factor which is the number of weeks since
the last regular calculation date divided by 52.
(158) Section 7. NO DUPLICATION. In no event shall any vacation-eligible
earnings which are used to calculate the amount of one vacation payment be used
in the calculation of any other vacation payment to the same employee.
(159) Section 8. INTENT. It is the intent of the Company and the Union that
all employees who are eligible for at least two (2) weeks of vacation with pay
under this Article shall be encouraged to take an actual absence from work for
two weeks. Employees who are eligible for additional vacation, at a time other
than shutdown, must notify the Company by July 1st in order to receive all
vacation monies prior to the shutdown period. Anyone who does not notify the
Company by this date, will be paid for vacation as it is used. The balance of
unused vacation will be paid the first pay of December. If an employee makes a
request for vacation by September 30th, the Company will see that it is granted
before the end of the year. All vacation payments will be in one week
increments.
(160) Section 9. RESIGNATION, RETIREMENT OR TERMINATION. If an employee with
one or more years of service resigns, retires or is terminated and the employee
has not met the eligibility requirements for a full vacation benefit in that
year, the date of his retirement, resignation or termination shall be a
calculation date for that employee and he shall be paid an amount equal to 40
hours, for each week of vacation eligibility times the average rate per hour
used to calculate his last regular vacation pay (adjusted for any intervening
wage increases) times a factor which is the number of weeks since the last
regular calculation date divided by 52.
ARTICLE XIV
GRIEVANCE AND
ARBITRATION PROCEDURE
(161) (A) An employee having a request or complaint shall first present
it to his foreman. The employee may ask his steward to
accompany him in his discussion with the foreman.
(162) (B) A grievance is defined as any dispute arising during the term
of this Agreement involving an alleged violation of the terms
of this Agreement, an alleged failure to comply with the
Agreement or alleged past practice, or a disagreement as to
the interpretation or application of the Agreement if such
dispute is between the Company and the Union or between the
Company and any bargaining unit employee.
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(163) (C) Any grievance, as above defined, shall be processed in the
following manner:
(164) Step 1 - The employee, with or without the steward, shall first
verbally present the grievance to his foreman within three (3) working days
after occurrence of the event or within three (3) working days after the day the
employee learns of the event, whichever is later. The foreman shall give his
verbal answer within one working day.
(165) Step 2 - If no settlement is reached, the grievance may be reduced to
writing on a form which will be provided by the Company within one (1) working
day of the day the foreman gives his verbal answer. It shall be signed by the
grievant and presented to the foreman within two (2) working days of his receipt
of the grievance form.
(166) Step 3 - If the grievance is not settled in the second step, it may
then be presented to the Human Resources Department by the Committee. Management
and the Union Committee will attempt to settle the grievance at the next
regularly scheduled meeting, provided the grievance is presented to the
Personnel Department at least 48 hours prior to the meeting. The Company's
answer to the grievance will be given within five (5) working days after the
meeting.
(167) Step 4 - If the grievance is not settled in the third step, it shall be
referred to the International Representative of the Union who shall meet with
the local Union Committee and Management at the next regularly scheduled meeting
for the purpose of adjusting the grievance. Management has thirty (30) days from
the date of the meeting to give its final answer. On any grievance, no employee
shall be entitled to relief extending more than one (1) day prior to the date of
the filing of the written grievance.
(168) Step 5 - If the Company's final answer is not satisfactory, the Union
may, not later than thirty (30) days after the answer is given, appeal the
grievance to arbitration. If no agreement can be reached within thirty (30) days
as to the choice of an Arbitrator, one will be selected from the Federal
Mediation and Conciliation Service by the usual method. The expense of
arbitration will be shared equally by the Union and the Company.
(169) The Arbitrator shall have power to rule only in cases where differences
exist as to interpretation of the contract or past practices. The Arbitrator
shall have no power to add or to subtract from or modify any of the terms of
this Agreement, nor to establish or change the wage structure. He shall have no
power to order back pay in any case of shutdown, strike, or work stoppage. The
award shall be rendered promptly and, unless otherwise specified by law not
later than thirty (30) days from the date of closing the hearings, or if oral
hearings have been waived, then from the date of transmitting the final
statements and proofs to the Arbitrator. Any case appealed to an Arbitrator on
which he has no power to rule shall be referred back to the parties with a
decision to that effect.
(170) Failure of any of the parties to any grievance to comply with the
provisions of Steps 1, 2, 3, 4, or 5 within the time limits shall automatically
determine the grievance in favor of the other
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party and shall not be subject to reopening. However, the time limits may be
waived by mutual agreement.
(171) The grievance procedure may be used by the Company in processing a
grievance. The district director or his authorized representative shall have the
right to enter the plant under the rules and regulations of the plant to make
any necessary investigation of a grievance which has been referred to him.
(172) Any decision arrived at by the Company and the Union Committee, or
their representative, in the course of the grievance procedure, in connection
with the application of this Article, shall be binding upon all the parties
providing that such decisions are not inconsistent with the provisions of the
Agreement. Any agreement between the parties which changes any of the provisions
of the basic agreement shall not be enforceable to the extent that it is
inconsistent with or goes beyond the provisions of the agreement unless it is
approved by the International Officers of the Union and an executive of the
Company.
(173) Any grievance which the Committee or Company wishes to present shall be
initiated at Step 3. The time limits set forth in this step shall be applicable
to such grievances.
ARTICLE XV
DISCIPLINE
(174) Section 1. GENERAL. The Company shall have the right, at any time, to
adopt reasonable plant rules and regulations. All employees shall be subject to
such rules and regulations. The reasonableness of any such rule or regulation
adopted by the Company shall be subject to the grievance and arbitration
procedure.
(175) Section 2. DISCHARGE CASES. In the exercise of its right as set forth
in Article III, the Management agrees that a member of the Union shall not be
peremptorily discharged from and after the date hereof, but that in all
instances in which Management may conclude that the employee's conduct may
justify discharge, he shall first be suspended.
(176) Such suspension shall be for not more than five (5) working days.
During the period of initial suspension, the employee may, if he believes that
he has been unjustly dealt with, request a hearing and a statement of the
offense before his foreman or the Personnel Department or the general
superintendent or the manager of the plant, with or without a member or members
of the grievance committee present as he may choose.
(177) At such hearing, the facts concerning the case shall be made available
to both parties. After such hearing and within the period of initial suspension,
Management shall conclude whether the suspension shall be converted into
discharge or dependent upon the facts of the case, that such suspension shall be
extended or revoked. If suspension is revoked, the employee shall be returned to
employment and receive full compensation at his regular rate of pay for the time
lost but in the event of the affirmation or extension of the suspension or
discharge of the
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employee, the employee may allege a grievance which shall be handled in
accordance with the procedure of Article XIV, "Grievance and Arbitration
Procedure".
(178) Should it be determined by the Company or by an umpire in accordance
with Step 5 of the Grievance Procedure that the employee has been discharged or
suspended unjustly, the Company shall reinstate the employee and pay full
compensation at the employee's regular rate of pay for the lost time.
(179) However, if the Arbitrator determines or the parties agree that the
employee should not be returned to employment with full back pay, the employee
may be returned to employment without back pay or with a lesser amount of back
pay, as the circumstances require.
ARTICLE XVI
NO STRIKES OR LOCKOUTS
(180) Under no circumstances, unless arbitration is not agreed to by the
Company, shall any strike, sympathy strike, stoppage of work, walkout, slow
down, picketing, boycott, refusal to work or other interference with or
interruption of the normal conduct of the employer's business be ordered
sanctioned, permitted or enforced by the Union, its officials, agents or
stewards. Under no circumstances, unless arbitration is not agreed to by the
Union, shall any lockout be ordered, sanctioned, permitted or endorsed by the
employer, its officials or agents.
ARTICLE XVII
SAFETY & HEALTH
(181) Section 1. GENERAL PROVISIONS. The Company shall provide and enforce
the use of personal protective equipment where it is necessary by reason of
hazards or processes or environment for the safety and health of employees
during the hours of their employment. The Company will furnish goggles, tape,
gloves, rubber boots and aprons on jobs where it has done so in the past.
(182) Section 2. SAFETY COMMITTEE. The Company agrees to recognize the
designated safety committee and hold quarterly meetings to consider
recommendations relative to safety and health. If any member of the Safety
Committee becomes aware of an unsafe operation or condition, he can bring it to
the attention of Management immediately without the calling of a special
meeting. If no action is taken within a reasonable period of time, the Safety
Committee will meet to discuss the problem. The Union Safety Committee will be
provided the opportunity to attend all meetings with O.S.H.A.
(183) Section 3. SAFETY GLASSES. The Company will provide and pay for
prescription Safety Glasses for all employees requiring them. In addition, upon
submission of a paid receipt, the Company will pay for one (1) eye exam for
employees every other year.
(184) Section 4. USE OF SAFETY EQUIPMENT. All employees are required to use
Safety Equipment, which, in accordance with the law, is necessary for the
protection of the employee's
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Safety and Health. Failure to use and properly care for safety equipment and
devices or failure to follow safety rules and environmental compliances while on
company property shall be prohibited and subject to disciplinary action.
(185) As a condition of employment, all employees are required to wear safety
glasses in the general plant and to abide by all rules established to maintain
compliance with all environmental regulations. Appropriate safety equipment will
be provided by the Company.
(186) Failure to wear safety glasses and other safety equipment provided by
the Company shall result in disciplinary action.
(187) It is understood that compliance with environmental regulations is a
condition of employment. While on Company property, if an employee's willful
actions results in a violation of established environmental rules or
regulations, said employee shall be subject to immediate disciplinary action as
outlined in Article XV, Section 2.
ARTICLE XVIII
MILITARY AND NAVAL SERVICE
(188) The Company will comply with all valid laws, rules and regulations
relative to the return of employees from the armed forces of the United States
and in so doing, will consult with the Union.
(189) Section 1. VACATION OR VACATION PAY. An employee who at the time of
leaving active employment to enter military service of the United States, has
qualified for a vacation in the year of such entrance and who has not received a
vacation or vacation pay, shall be granted such pay. Any employee re-employed
under the terms of this Article XVIII and who under the terms of Article XIII,
VACATIONS, of this Agreement, except for his absence due to such military
service, would have been entitled to receive a vacation or vacation pay, shall
receive such vacation or vacation pay for the calendar year in which he is
re-employed without regard to any requirement other than an adequate record of
continuous service. Such vacation or vacation pay shall be the same vacation or
vacation pay to which such employee was entitled before entering military
service, adjusted to reflect any wage increases effective during his absence and
to reflect any additional vacation or vacation pay to which his total continuous
service, but such absence, would have entitled him.
(190) Section 2. ENCAMPMENT PAY. An employee with one or more years of
continuous service who is required to attend an encampment for the Reserve of
the Armed Forces or the National Guard, shall be paid for a period not to exceed
two weeks in any calendar year, the difference between the amount paid by the
Government (not including travel, subsistence and quarters allowance) and eighty
(80) hours at the employee's base rate when proof of such service is presented
to the Personnel Department.
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ARTICLE XIX
TERMINATION
(191) This Agreement shall become effective the date it is signed and shall
terminate at 11:59 p.m. on April 1st, 2001. Any wage increase granted by this
contract as specified in Article V, Section 1, shall be effective as of the date
so specified in that section.
(192) Either party shall have the right to ask the other to negotiate on the
Labor Agreement by 60 day advance notice served upon the other on or after
January 17th, 2001. Any notice to be given under this Agreement shall be given
by certified mail; be completed by and at the time of mailing; and, if by the
Company be addressed to the United Steelworkers of America, Five Gateway Center,
Pittsburgh, PA, and if by the Union to the Company at Newcomerstown, Ohio.
Either party may, by like written notice, change the address to which certified
mail notice to it shall be given.
ARTICLE XX
NON-DISCRIMINATION
(193) The Company and Union agree to the continuing policy and practice of
non-discrimination in respect to race, color, religion, sex, age (as defined in
the Federal Age Discrimination in Employment Act of 1967) or national origin.
(194) Section 1. SMOKING.
(A) This Agreement gives the employees the right to smoke during
their regular working hours provided they adhere to Company smoking rules and
regulations. Fire safety smoking areas, where smoking is prohibited, will be
marked accordingly. No smoking in these restricted areas is a condition of
employment, and anyone found smoking in any of these areas shall be subject to
disciplinary action.
(195) Section 2. WASH-UP PERIOD.
(A) A five (5) minute wash-up period shall be allowed immediately
preceding lunch break and end of shift. If this wash-up allowance is subject to
widespread abuse, the Company shall have the right to receive cooperative
assistance from the Union Committee in enforcement and if such measures fail,
the allowance may be withdrawn.
(B) The Company will comply with all mandated governmental laws
pertaining to required shower regulations. The shower period will be at the end
of the shift and the shower and wash-up period shall not exceed (20) minutes.
(196) Section 3. ABUSIVE LANGUAGE. It has been agreed that it is necessary to
establish certain rules, regulations and penalties to cover the conduct of
employees of the Company while they are on duty or within the bounds of the
Company's property.
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(197) Therefore, the use of profane, abusive or threatening language toward
any employee, indulging in boisterous acts that could cause or lead to injury or
threatening injury to other employees is PROHIBITED. Any employee found guilty
of indulging in any of the above acts, shall be suspended for one (1) day on the
first offense, two (2) days on the second offense, three (3) days for the third
offense, and five (5) days for the fourth offense. This rule will apply to each
twelve (12) month period from the first offense.
(198) Any employee found guilty of fighting or having possession of guns on
Company property, shall be subject to discipline up to and including discharge.
ARTICLE XXII
JOB EVALUATION
(199) Section 1. JOB EVALUATION PROCEDURES. All Local Union No. #2737-16
bargaining unit work at the Newcomerstown Plant has been described and evaluated
by the Job Evaluation Committee in accordance with the provisions of the C.W.S.
Job Description and Classification Manual, updated as of January 1st, 1963, as
incorporated into the Heller Tool Division Job Evaluation Manual dated August
17, 1971 hereinafter referred to as the Manual. The Manual shall become
effective simultaneously with the New Hourly Wage Payment Plan.
(200) The job description and classification for a given job will become
effective with respect to an employee when an employee's job is covered by the
New Hourly Wage Payment Plan and shall continue in effect unless:
(201) A - The Company changes the job content (requirements of the job as to
the training, skill, responsibility, effort, and working conditions) to the
extent of one full job class or more;
(202) B - The Job is terminated or not occupied during a period of one year;
or
(203) C - The description and classification are changed in accordance with
mutual agreement of officially designated representatives of the Company and the
Union. When and if from time to time the Company, at its discretion, establishes
a new job or changes the job content (requirements of the job as to training,
skill, responsibility, effort, and working conditions) of an existing job to the
extent of one full job class or more, a new job description and classification
for the new or changed job shall be established in accordance with the following
procedure:
(204) 1 - The Company will develop a description and classification of the
job in accordance with the provisions of the Manual.
(205) 2 - The proposed description and classification will be submitted to
the Job Evaluation Committee for approval and the standard hourly wage scale
rate for the job class to which the job is thus assigned shall apply in
accordance with the provisions of Subsection C of this Section. At the same
time, copies of the proposed description and classification shall be sent to a
designated representative of the International Union.
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(206) 3 - The Job Evaluation Committee shall discuss and determine the
accuracy of the job description.
(207) 4 - If the Job Evaluation Committee is unable to agree upon the
description and classification, the Company shall install the proposed
classification, and the standard hourly wage scale rate for the job class to
which the job is thus assigned shall apply in accordance with provisions of
Subsection C of this Section. The Union Committee shall be exclusively
responsible for the filing of grievances and may at any time within thirty (30)
days from the date of installation file a grievance with the plant management
representative designated by the Company alleging that the job is improperly
described and/or classified under the provisions of the Manual. Thereupon the
Job Evaluation Committee shall prepare and mutually sign a stipulation setting
forth the factors and factor codings which are in dispute. Such grievance shall
be settled in accordance with the Grievance Procedure starting at the third
step.
(208) 5 - In the event the parties fail to agree as provided, and no request
for review or arbitration is made within the time provided, the classification
as prepared by the Company shall be deemed to be approved.
(209) 6 - In the event the Company does not develop a new job description and
classification the Union Committee may, if filed promptly, process a grievance
under the grievance and arbitration procedure of this Agreement requesting that
a job description and classification may be developed and installed in
accordance with the provisions of the Manual. The resulting classification shall
be effective as of the date when the new job was established or the change or
changes installed.
(210) 7 - CHANGED JOBS OF LESS THAN ONE JOB CLASS. When the Company changes a
job but the job content is less than one (1) full job class, a supplementary
record shall be established to maintain the job description and classification
on a current basis and to enable subsequent adjustments of the job class for an
accumulation of small job content changes in accordance with the following:
a - The Company will prepare a record of such changes to supplement the
original job description and classification.
b - A copy of such record will be given to the Job Evaluation Committee. It
shall not be necessary for the Committee to indicate their agreement or
disagreement with such report unless it is claimed that the change or changes in
the job, when added to the prior change or changes, require a change in the job
classification to the extent of one (1) full job class or more.
c - When and if the job content changes of less than one (1) full job class
accumulate to a total of one (1) job class or more, the job shall be reassigned
to the appropriate job class on the basis of such total accumulation and the
reassignment shall become effective from the date of the most recent change in
job content.
d - Anytime a job is re-evaluated and the job class goes up less than (1)
full point, but
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crosses over into the next pay grade, it will be given the higher pay grade.
e - In the event the parties fail to agree to a classification of a new or
changed job, and no request for a review or no grievance is filed within thirty
(30) days of the most recent change in job content, the classification as
prepared by the Company shall be deemed to be approved.
(211) In the event the Company does not develop a new job description and
classification for a new job, or a record of a changed job, the Union Committee
may file a form (Notice of Job Description Change) outlining the changes in the
job, or that a new job has been established, and requesting that a job
description and classification or a record of job changes be developed. If the
Company then fails to develop a job description and classification or a record
of job changes, the Union Committee may within thirty (30) days of such written
request, file a grievance under the grievance procedure requesting that a job
description and classification of such new job or a reclassification of a
changed job be developed in accordance with the Manual and the application of
this section.
(212) Section 2. JOB EVALUATION COMMITTEE. Job Evaluation Committee will
consist of four members, two selected from the Company and two selected by the
Union.
(213) Section 3. JOB EVALUATION UNDERSTANDING. The Company and the Union
agree that prior to implementation of the "New Plan," jobs in the Department
will be reviewed as to the correctness of the description. If it is determined
that the job content of the description has changed, then the job description
will be subject to re-evaluation and will be treated as though it was being
described and evaluated for the first time. Otherwise, the original evaluation
and resulting labor grade will remain unchanged and the grade level will not
change unless there is a change in the job classification to the extent of one
(1) full job class or more.
(214) Section 4. CWS JOB LABOR GRADES AND POINTS.
Labor Grade From Points Including
and
#1 0 thru 6.3
#2 6.4 thru 9.4
#3 9.5 thru 12.4
#4 12.5 thru 16.4
#5 16.5 thru 19.4
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ARTICLE XXIII
MISCELLANEOUS
(215) Section 1. INSURANCE COVERAGE. The Company will provide the following
insurance coverage as agreed to by the parties:
A. (6) months of paid insurance for employees on A&S or Workers'
Compensation
B. (1) month of paid insurance for laid-off employees following
the month of lay-off.
C. One (1) annual hearing test for employees who are not required
to be tested due to on-the-job noise exposure. Employees must
be tested prior to the start of the shift, at lunchtime, or
after work.
D. Prescription Drug Card
Retail Co-pay:
--------------
Generic $10.00
Brand Name $20.00 *All 30-Day Supply
Non-Formulary $30.00
Mail Order:
-----------
Generic $20.00
Brand Name $40.00 *All 90-Day Supply
Non-Formulary $50.00
E. A&S Insurance Increase from $250.00/week to $275.00/week.
Effective 4-6-2000 (26 week maximum).
F. Life Insurance $15,000.
G. Monthly Contribution
Employee Only $10.00
Employee & Dependents $20.00
For an explanation of all insurance benefits, employees should refer to their
"Summary Description Plan" booklet.
(216) Section 2. RETIREMENT PLAN. The Company will set up a retirement Plan
account for each hourly employee. Annually, the company will contribute 5% of
the employee's annual eligible compensation to that account. This contribution
will increase from 5% to 5-1/2% effective 4/6/99. A 401K plan will be provided
as a supplement to the present retirement plan as a voluntary contribution.
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(217) Section 3. PRINTING. The Company agrees to supply copies of the Basic
Agreement to all present employees and new employees as well as the Local Union
and International Representative when they become available.
(218) Section 4. PRODUCTIVITY GAINSHARING. The Company and Union recognize
the need to encourage and reward productivity. The procedure for recognizing and
rewarding improvements in productivity shall be the Productivity Gainsharing
Plan.
(219) This program shall be a plantwide plan based on the productivity of the
direct labor bargaining unit employees.
(220) The measure of productivity shall be an index equal to the amount of
earned direct labor hours divided by the total clock hours of direct labor
employees.
(221) New standards will be established for new products and new equipment.
Previously established Industrial Engineering practices shall be employed. The
clock hours spent on new equipment or new products shall not be used in the
computation until such time as standards are issued.
(222) Earnings computation shall be based on a comparison of the quarterly
index to the base index. The base index shall be 79.84. All bargaining unit
employees will receive a gainsharing payment equal to their straight time
earnings times the increased %. The productivity index shall be computed for
each calendar quarter and paid out as follows:
<TABLE>
<CAPTION>
% of Base Payout
--------- ------
<S> <C>
90 to 99.9 0%
100 to 108.9 75.0%
109 and up 90.0%
</TABLE>
(223) If the quarterly index is lower than 90% of the base period index, a
pay deduction shall be computed using the same procedure. Such deduction will be
based on all productivity losses below the 90% level.
(224) The Company will exclude rework operations from any calculation (both
D.L. and earned hours), and will review and change, if necessary, long-term
non-standard conditions. Any present outside purchased blanks will still be
given credit in the Gainsharing System. Product numbers will not be changed
unless it reflects base period rates.
(225) The Union Committee will designate any union member of their choice to
be the liaison with the Company in resolving/identifying problem areas. Such
areas to include excess machine downtime and improper allocation of Gainsharing
bonus.
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(226) Simonds Industries Inc. and the Union mutually encourage ongoing
productivity gains. The Company will endeavor to work with the Union to refine,
modify or improve this plan and/or devise alternate plans which promote
productivity gains.
(227) IN WITNESS WHEREOF, the parties having included herein the entire
agreement between the parties relating to wages, hours and terms and conditions
of employment for employees covered by this Agreement for the duration of this
Agreement and having voluntarily and unqualifiedly waived the right to bargain
collectively with respect to any subject whether or not specified in this
Agreement for the duration of the Agreement, do hereby sign this Agreement this
5th day of April, 1998.
UNITED STEEL WORKERS OF SIMONDS INDUSTRIES INC.
AMERICA AFL-CIO LOCAL #2737-16
__________________________________ __________________________________
__________________________________ __________________________________
__________________________________ __________________________________
__________________________________ __________________________________
__________________________________ __________________________________
__________________________________ __________________________________
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<PAGE> 36
LETTER OF UNDERSTANDING
INSURANCE
The Company and the Union have committed to make a concerted good faith effort
in reviewing any rising insurance costs and, as a means of controlling these
costs, will discuss items that might be of mutual benefit.
S.A. Osler
Human Resources Manager
SUB-CONTRACTING
In the event the Company finds it necessary to sub-contract work out or
outsource any work which is customarily performed by the bargaining unit at the
Newcomerstown facility, it will give notice to the Union prior to
sub-contracting or outsourcing the work. Further, the Company will discuss the
economic and business reasons of the decisions to sub-contract or outsource with
the Union and will consider in good faith the input from that discussion prior
to sub-contracting or outsourcing the work. The Company, however, reserves the
right to sub-contract or outsource bargaining unit work, if business and
economic reasons deem it appropriate to do so.
S.A. Osler
Human Resources Manager
PROPER TERMINOLOGY FOR FILLING JOB VACANCIES
BID/BUMP PROCEDURES
1. Recall to in-house bid job.
2. Bump.
3. Bid.
4. Temporary Bid.
PLACEMENT
1. Call back from lay-off to an open job.
2. When an employee has an option of bumping
the junior person or an open job, and he/she
takes an open job.
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ASSIGNMENT
1. Temporary transfer/loan.
2. Out-of-Work.
S.A. Osler
Human Resources Manager
SCHEDULING OVERTIME/COMBINATION JOBS
In scheduling overtime, when a combination job contains the same number as a
single job in a department, and a more senior employee occupies the single job
where overtime is needed, that person can refuse the overtime and the junior
employee in the combination job can be forced to work.
It is also understood:
1. In scheduling Saturday overtime, the Company will continue to schedule
employees in the single job number before those in the combination
job/jobs, regardless of the seniority of the person in the combination
job.
2. When choosing work stations in the department, the employees in the
single job numbers will choose by seniority before anyone in the
combination job/jobs.
3. Employees in a single job number CANNOT pull shift preference over an
employee in a combination job.
S.A. Osler
Human Resources Manager
LETTER OF UNDERSTANDING
PRESCRIPTION DRUG CARD
During the term of this Labor Agreement, if a generic or brandname drug does not
appear on United Healthcare's Preferred Drug List, and a covered employee or
dependent is required to pay the non-formulary price for a prescription, Simonds
will reimburse the employee for the difference between the non-formulary amount
paid and the generic copay ($10) or the brandname copay ($20).
The same procedure will be followed for those utilizing the mail-order options:
Simonds will pay the difference between the non-formulary amount paid and the
generic copay ($20) or the brandname copay ($40).
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<PAGE> 38
Simonds may continue to seek further improvements in the prescription drug card
plan and may make changes, as long as the employees' benefit level is either
maintained or improved, and there is no extra cost to the employee.
S.A. Osler
Human Resources Manager
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<PAGE> 1
Exhibit 10.12
AGREEMENT
LOCAL NO. 2737-17
(1) THIS AGREEMENT dated April 6th, 1998 hereinafter referred to as the Basic
Agreement, between Simonds Industries Inc. Newcomerstown, Ohio, or its
successors (hereinafter referred to as the "Company") and the UNITED
STEELWORKERS OF AMERICA, AFL-C10 (hereafter referred to as the "Union").
ARTICLE I
RECOGNITION
(2) Section 1. The Company recognizes the Union as the exclusive bargaining
agency for collective bargaining purposes for all of its factory clerical
workers, excluding all foremen, assistant foreman, Company Time Study employees,
production and maintenance employees, first aid department, watchmen, power
house engineers and Main Office workers or in the event that any employee
covered by this Agreement be transferred to the Main Office.
(3) Section 2. As a condition of employment, all employees shall become and
remain members of the Union in good standing in accordance with the constitution
and by-laws of the Union during the life of this Agreement. New employees, no
later than fifty-five (55) working days after the date of hiring shall, as a
condition of continuous employment, become and remain members of the Union in
good standing in accordance with the constitution and by-laws of the Union
during the life of the agreement.
(4) Section 3. Check-Off. The Company shall deduct from the pay for the third
full payroll period each month, the Union dues for such month, initiation fee if
owing, and assessments and remit same to the International Treasurer of the
Union upon the basis of, and for the term of individually signed voluntary
check-off authorization cards heretofore and hereafter submitted to the Company.
(5) The International Treasurer shall be the sole person to certify the dues and
assessments due to the Union by the employees.
(6) The Union shall indemnify and safe the Company harmless from any claims,
suits, demands or other forms of liability that shall arise out of reliance upon
certified lists furnished to the Company by the Union for the purpose of
complying with the provisions of this Agreement.
<PAGE> 2
ARTICLE II
WAGES
(7) Section 1. The wage rates to be paid will be as indicated in Schedule B
which is attached hereto and by this reference made part hereof, to be
effective as of the dates set forth in that Schedule B.
(8) Section 2. Job Evaluation and Job Number Wage Rate Classification.
(9) The job evaluation committee shall consist of two representatives from the
Union and two representatives from Management. The function of this Committee is
to establish the job classification wage rate to be paid to new, changed or
combined jobs not in effect as of the date or signing of this Agreement.
Schedule C - Job Evaluation, is hereto annexed and by this reference made a part
hereof. Jobs will be re-evaluated upon the request of the union committee.
Normal evaluations will not be accomplished more than once per contract term.
Section 3. Assignment of Work - Wages Paid.
(10) - The Company shall have the right to assign work or jobs to any employee
within their bid in job shift in all wage rate classifications in accordance
with work load requirements.
(11) - Employees assigned work or jobs other than their own (loaned) shall
receive the wage rate classification of the job assigned or their own rate,
whichever is higher. If an employee is transferred to a job that is part of a
combination job, and that employee is qualified on all portions of the
combination job, they will receive the combination rate.
(12) Section 4. For the purpose of computing shift differential the starting
time of the various shifts shall be as follows:
First Shift - 6 a.m. to 8 a.m.
Second Shift - 2 p.m. to 4 p.m.
Third Shift - 10 p.m. to Midnight
(13) An employee regularly scheduled for the day shift who completes his regular
eight hour shift and after leaving the Company's premises is called back within
the same work day shall be paid the applicable shift differential for the hours
worked on the shift for which he is called back.
(14) An employee regularly scheduled for work who completes his regular eight
hour shift and continues to work the succeeding shift in excess of four (4)
hours, shall be paid the applicable shift differential for all hours worked over
four hours in the succeeding shift.
(15) An employee regularly scheduled for work on the third shift and who
completes his regular eight hour shift and continues to work the succeeding
shift will carry his applicable shift differential for all hours worked overtime
on the said succeeding shift.
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(16) For hours worked on the second shift there shall be paid a premium rate of
twenty (20) cents per hour. For the hours worked on the third shift there shall
be paid a premium rate of twenty six cents (26) per hour. Shift differentials
shall be included in the calculation of overtime compensation.
(17) Section 5. When the Company is responsible for paying for the participation
of Union Grievance committee meetings, grievance committee members will be paid
at their respective base wage rates for all hours. The Company and Union will
alternate the responsibility for paying for their participation in regular
grievance committee meetings.
ARTICLE III
HOURS OF WORK
(18) Section 1. This article shall not be construed as a guarantee of hours of
work per day or per week.
(19) Section 2. The normal hours of work shall be eight (8) per day and forty
(40) per week. The daily hours of work shall be consecutive except for such
lunch periods as may be provided in accordance with practices heretofore
prevailing in the plant.
(20) Section 3. Hours worked in excess of eight (8) working hours or in excess
of a total of forty (40) hours in a work week or days worked in excess of five
(5) work days within the work week shall be paid for at one and one-half times
the normal rate of pay. Overtime payment shall be made on the basis of either
daily or weekly overtime hours worked, but an employee shall not be paid both
daily and weekly overtime for the same overtime hours worked.
(21) Section 4. The normal work day shall be any regularly scheduled consecutive
twenty-four (24) hour period comprising eight consecutive hours of work and
sixteen hours of rest subject to provision of subdivision (2) dealing with lunch
periods, and the normal work week shall be five consecutive work days followed
by two consecutive rest days within seven consecutive days.
(22) Section 5. Premium Pay. Time and one-half shall be paid for work performed
on Saturday and double time paid for work performed on Sunday as such, premium
pay and overtime shall not be paid for the same hours worked.
(23) Section 6. Reporting Pay. Employees scheduled to work or who are notified
to report for work and report and start to work shall be paid. In the event of
there being no work available or there being available less than four hours
work which is in the regular course of their operations, for four hours work at
their average straight time hourly earnings or the rate of the job to which
they are assigned, whichever is the higher. If employees refuse such
assignments, they shall not receive the benefit of such guaranty of four hours
reporting pay. After the first four (4) hours, an out-of-work employee will
receive the evaluated base rate of his regularly assigned job,
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or the job he is assigned to, whichever is higher. If the employee opts to go
home after (4) hours, that time will be counted as absenteeism.
(24) The above shall not apply where an employee is notified not to report for
work or is not scheduled to report.
(25) If because of events beyond the reasonable control of the Company, work is
not available to an employee so reporting for work, the provisions of Section 6
shall not apply.
(26) Section 7. Allowance for Jury Service. An employee who is called for jury
service or subpoenaed as a witness shall be excused from work for days on which
he serves and he shall receive for such day of service as a juror or witness on
which he otherwise would have been scheduled to work, the difference between 8
times his average straight time hourly earnings and the payment he receives for
such service. The employee will present proof of service and of the amount of
pay received therefore. Time off from work in order for an employee to give a
deposition, will not be paid under this provision.
(27) Section 8. A five minute wash-up period will be allowed immediately before
the lunch period and immediately before quitting time at the end of the shift.
(28) Section 9. Allowance for Funeral Leave. Three (3) days Funeral Leave will
be guaranteed to non-probationary employee (upon request) in case of death of
the employee's mother, father, sister, brother, mother-in-law, father-in-law,
brother-in-law, sister-in-law, son-in-law, and daughter-in-law, in immediate
marriage relationship, grandchild or grandparent of the employee or his spouse,
or when they have lived with the employee in an immediate family relationship,
the employee's stepmother, stepfather, stepbrother, and stepsister in order for
the employee to attend the funeral. It is understood that a brother-in-law or
sister-in-law of an employee in the immediate marriage relationship will be
defined as an employee's spouse's brother or sister or an employee's brother or
sister and his or her spouse, (4) four days will be granted (upon request) in
case of death of the employees legal spouse, son or daughter, including
stepchildren (when they have lived with the employee in an immediate family
relationship).
(29) All funeral leaves shall be taken on consecutive scheduled working days
provided that one such scheduled working day shall be the day of the funeral and
it is established that the employee attended the funeral.
(30) For those funeral leaves which are limited to three days, the employee may
have as their last day the day of the funeral or the day following the funeral
at the employee's option.
(31) For each day of such authorized leave, the Company will pay for the
normally scheduled hours not exceeding eight (8) times his evaluated base rate.
Proof may be required by the Company of the relationship and that the funeral
was attended by the employee; if not attended, or if the requested proof is not
forthcoming or satisfactory, there shall be no eligibility for any funeral leave
pay. Funeral leave pay shall not apply to Saturday, unless scheduled to work,
Sunday, observed holidays set forth in Article V., time when employee is on
vacation, any period
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when the employee is eligible for Workman's Compensation or non-occupational
disability benefits, or when it duplicates pay received for time not worked for
any other reason.
(32) Section 10. Injury at Work. Any employee who is injured while engaged in
work properly assigned to him and who must leave work because of the injury,
shall receive pay at his base rate for the balance of the regularly scheduled
shift on which he is injured.
ARTICLE IV
SENIORITY
(33) Section 1. In case of promotion, increase or decrease of forces, lay-off or
recalls within the bargaining unit, length of continuous service shall be the
determining factor. Continuous service or seniority as used herein is defined as
an employee's total continuous unbroken service with the Company from his last
date of hire.
(34) Section 2. A seniority list will be furnished to the local union committee
at lease every six (6) months. The seniority list will be reviewed within 30
calendar days and posted and if not challenged for error within 30 days from
date of posting by any employee or the Union, it shall be accepted by the
employees, Union and Company as, accurately reflecting the status of such
employees. The seniority will be furnished the local union committee whenever
there is a change.
(35) The Union will supply the Human Resources Department with a list of Union
Officers/Steward and will provide prompt notification of any changes.
(36) A list shall be posted listing the employees in the department as to their
seniority and jobs on which they are qualified. The list shall be open for
challenge for a period of 10 days, after which if they have not been challenged
and corrected for error, shall accurately reflect the seniority status of such
employees, and shall be binding upon the employee, the Union and the Company.
All such challenges must be mutually agreed upon by the union committee and
management. The department supervisor and the department steward will bring this
list up-to-date at least once each six months if necessary to reflect a change.
The employee holding the utility classification may qualify on each job by
accumulating a minimum of 30 working days within a 12 month period on each job.
A record of days worked will be kept by the supervisor. Upon qualification the
seniority board will be revised accordingly.
(37) Section 3. In the event of a new or substantially changed job or a vacancy
occurs, a solicitation will be made of employee in order of seniority to
determine the employee to be awarded such job. A job description of the job
solicited will be shown to each employee until the job is accepted and the
solicited employee will indicate his acceptance or rejection of the job by
initialing the job description. Employees solicited may have up to one hour to
decide if they wish to accept the job.
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(38) The same procedure will apply to the job or jobs vacated by employees
accepting the new or vacant jobs. A reasonable effort will be made by the
Company and Union to contact absent employees advising them of such job openings
and if contacted they may have up to one hour to decide if they wish to accept
such job.
(39) The most senior employee requesting the job will be awarded the job unless
otherwise agreed to by the Company and the Union.
(40) In the operation of this clause it is the intention of the Company and the
Union to fill job vacancies as quickly as possible consistent with orderly
operations. Any person accepting a job through solicitation cannot withdraw his
or her acceptance.
(41) If the person awarded the job is disqualified, a new solicitation will be
made.
(42) Section 4.(A) In the event of a new job, or job on which the base rate has
been changed, the following shall apply in the order listed:
a. Solicit employees for the job.
b. Call-back laid-off employees by seniority.
c. New hire.
(B) In the event of a job vacancy, the following shall apply in the
order listed:
a. Bid holders of the job anywhere in the plant will be recalled to
such job in order of seniority.
b. Solicit employees for the job.
c. Call back laid off employees by seniority.
d. New hire.
(43) Disqualification shall normally be within a thirty (30) working day
qualification period. If additional time is needed, the 30 working day period
may be extended by mutual agreement. After qualification for a job, no clerical
worker can be disqualified without just cause.
(44) Section 5. The person awarded the job not qualifying for the job within 30
working days, shall return to his or her former position and anyone having
advanced to fill the position vacated shall return to his or her own position
and so on down the line.
(45) Section 6. In case of a reduction of working force, the employees affected
by the reduction of the working force or elimination of their job, may bump only
where qualified, then if no qualification exists may bump any other worker with
less seniority as a factory clerical worker for whose job they can qualify for
within 30 working days.
(46) If the employee does not qualify, he may then exercise his seniority and
bump any other less senior employee providing this privilege is not abused.
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(47) Section 7. No employee will have the right to bump another employee until
he is laid off or bumped from the job he is now performing. He shall then sign
a duplicate form showing the job he bumps to, one copy to be given to the
Union.
(48) Section 8. No seniority rights shall be exercised in the case of a lay-off
of one working day or less in a scheduled work week, if such exercise of
seniority rights would involve displacing another employee from his or her job.
Seniority rights may be exercised in the case of lay-off of more than one (1)
day.
(49) Section 9. Regulations regarding overtime and curtailed production:
(50) In the case of overtime and curtailed production the following shall apply.
(51) 1. If the services of a job are required, work the employee who has the job
bid in. For the purposes of this section, Bid, and bump shall be considered
synonymous. In case of a bid holder being loaned, and overtime or curtailed
production is required on both his own job and his loan, he shall work the
overtime or curtailed production on the job to which he is loaned.
(52) 2. If additional services of a job are required in addition to the employee
performing the job, the oldest qualified employee, as listed on the seniority
board will work. If additional services are still required, the second oldest
qualified and so on in that order. After all the qualified employees are
contacted, requirements for additional services must be assigned according to
seniority.
(53) 3. Probationary employees shall be entitled to daily overtime only on the
job they are holding by bid, bump, or assignment. Probationary employees shall
also be entitled to weekend overtime on the job they are holding by bid, bump or
assignment after they have completed 30 working days.
(54) 4. First shift employees will be notified they are scheduled for Saturday
work not later than 3:30 p.m. Thursday of that week. Second shift employees will
be notified they are scheduled for Saturday work not later than 7:30 p.m.
Thursday of that week.
Curtailed Production
(55) 1. If the full time or part-time services of a job are required, work the
employee who has the job bid in. For the purposes of this section, bid and bump
shall be considered synonymous.
(56) In the event of overtime or curtailed production in a control center, if
the work load requirements involve only scheduling the work load and handling
time cards, the employee or employees whose job or jobs are affected will in
advance make out a list of the work schedule and prepare the time cards for the
employees scheduled to work; the schedule and time cards will be given to the
employees and/or supervisors and the employee or employees' job will not be
scheduled to work.
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(57) Section 10. Disability Transfer. An employee's request for transfer due to
physical disability accompanied by a doctor's certificate (Form 269) will be
referred to the Human Resources Department. A copy of the 269 will be furnished
to the grievance committee. The Company shall have the right to require that
such applicant undergo additional examination or examinations by a physician or
physicians of its choice. If such privilege is granted, the employee may bump as
follows:
1st The disabled person may bump the least senior person.
2nd If the disabled person cannot perform the least senior person's job, then
the disabled person may bump the next least senior person.
3rd The next to the least senior person must then take the least senior
person's job.
(58) Section 11. Transfers out of the Bargaining Unit. All employees who are
transferred by the Company to jobs not included with the bargaining unit shall
accumulate seniority in the bargaining unit. At the end of such period, they
shall neither accumulate further seniority nor retain their seniority in the
bargaining unit.
(59) During the period in which seniority is being accumulated such transferred
employee shall have the right to transfer or bump back to a job he has
previously performed in the bargaining unit. After an employee once
re-transferred back into the bargaining unit and then later transfers out, he
will thereupon lose his seniority in the bargaining unit.
(60) Section 12. Employees who may be or who have been loaned from the Clerical
Workers to another job in the Company, will retain and accumulate his or her
seniority in the Clerical Group, but will not accumulate any seniority in the
department to which he or she is loaned. Such loan shall not exceed six months
unless extended by mutual agreement by the Union and Management. The person
loaned shall be paid at his rate or the rate of the job to which they are
loaned, whichever is higher.
(61) Section 13. Reclassification forms shall be marked by the following symbols
on each change of job: Bid, bum, placed (assigned), recall, call-back, loan or
transfer. Such changes will be recorded on the employees' employment record
card. Such reclassification forms will not be made out on job assignments that
do not exceed five days duration.
(62) Section 14. Leave of Absence. A leave of absence for compelling and
justifiable personal reasons made in writing may be granted by Company
discretion for periods up to six months, may be extended for further periods, if
request is made in writing up to a maximum total continuous leave period of two
(2) years. If the individual does not return to work after expiration of a leave
or receive a renewal seniority shall be lost.
(63) Section 15. Employee Sick Leave. If an employee shall be absent due to
sickness or accident and the facts presented signify that the employee shall
return to work, the Company at
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its discretion may fill the job by recall of an employee from the lay-off panel:
if any or by a new hire. When the absent employee returns to work he/she shall
return to his/her former job. The employee displaced shall also return to
his/her former job if any or be permitted to bump. If it is known that the
absent employee shall not return to work the job shall be posted for the bid.
(64) An employee granted leave of absence under the provisions of this Article
who does not return to work upon expiration of such leave of absence, or who is
found to have accepted other employment, it will be considered to have
terminated their employment unless otherwise mutually agreed upon by the Company
and the Union Committee. The Union will be given notification of all leaves of
absence.
(65) Section 16. Any local union member who is an employee of the Company shall
be given upon his request, a leave of absence not to exceed a period of two (2)
years for the purpose of working for the local Union or the International Union
with the provisions that it will not be granted to more than (1) person and such
leave of absence shall not constitute any break in the employee's record of
continuous service. Upon written request to the Company, such an employee may be
granted an extension of his leave of absence upon mutual agreement between the
Company and the Union.
(66) Any request for days off for Union Business shall be submitted in writing
to the Human Resources Department at least one day prior to the desired date and
shall not exceed 15 days per calendar year for any one employee. Conferences,
conventions, negotiations, and workers' compensation hearings are exempted from
the (15) day calculation, but still require written notification of time off.
(67) Section 17. The probationary period shall be for 55 working days and during
such time the employee shall be deemed to be on probation and will not accrue
seniority, however, if retained by the Company, the employee's seniority date
back to the last date of hiring.
(68) Section 18. Loss of Seniority. Seniority shall be lost (and any subsequent
rehire shall be as a probationary employee) as follows:
(69) 1. When an employee quits.
(70) 2. When an employee is discharged for just cause.
(71) 3. When an employee is absent for three (3) working days without notifying
the Human Resources Department, unless failure to make notification
can be justified or verified (by a doctor's certificate) personal
sickness or accident or death in the family. (Immediate family is same
as defined in Funeral Leave section of this agreement.)
(72) 4. Failure to report intentions and availability within (5) working days
after being called back: failure to report for working ten (10) days
after written notice. All
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recalls will be made by registered mail, return requested, at the last
address supplied to the Human Resources Department by the employee.
(73) 5. Failure to report for work within one working day of expiration of a
leave of absence.
(74) 6. If an employee shall be absent because of lay-off or physical
disability, he shall continue to accumulate continuous service during
such absence up to a maximum of two years, and he shall retain his
accumulated continuous service for an additional period equal to (a)
three years, or (b) the excess, if any, of his length of continuous
service at commencement of such absence over two years, the employee
must give the Company annual written notice that he intends to return
to employment when called, if the Company at least 30 days prior
thereto has mailed him a notice of the most recent address furnished
by him to the Company that he must file such a notice.
(75) 7. When an employee is jailed or imprisoned for a period in excess of
ninety (90) days.
(76) 8. Upon receipt by the Company of a second wage garnishment relating to a
separate debt within a 12 month period beginning with the date of the
first garnishment and upon the failure of the employee to obtain and
present to the Company a written statement releasing the Company from
any obligation under the garnishment to make a deduction from the
employee's pay.
ARTICLE V
HOLIDAYS
(77) The Company will pay employees with the bargaining unit for eleven (11)
holidays not worked in a year. An employee eligible under these provisions shall
receive eight hours straight time pay at his average rate including shift
differential. The eleven holidays are:
New Year's Day
Good Friday
Memorial Day
Fourth of July
Labor Day
Thanksgiving
Day after Thanksgiving
Day before Christmas
Christmas Day
December 31st
Floating Holiday
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(78) The floating holiday may be scheduled at any time during the year pending
prior supervisory approval.
(79) 1. The employee must be a regular employee on the active payroll of the
Company as of the date of the holiday. Probationary employees are not
entitled to receive holiday pay for holidays not worked.
(80) 2. The employee must be actively employed and would have been scheduled to
work if the day had not been observed as a holiday.
(81) 3. The employee must work his last full scheduled work day prior to and his
next full scheduled work day after such holiday within the employee's
scheduled work week unless excused by their supervisor. However,
payment for the holiday will be made if the employee works during the
week in which the holiday occurs, but is absent on the above days due
to Union activity, verified illness or accident, emergency illness at
home, death in the immediate family (immediate family is same as
defined in Funeral Leave section of this agreement), or jury duty, or
if he has been sent home during the week in which the holiday occurs
for lack of work.
(82) 4. If any of these holidays fall on a Saturday, observance will be on the
previous scheduled work day. If any of these holidays fall on a Sunday,
observance will be on the next scheduled work day.
(83) Should any holiday fall during the scheduled vacation period, the
holiday will be paid for in addition to the vacation pay and the
employee may extend his vacation for an additional day without pay if
he makes arrangements in advance to do so.
(84) If the Company requires an employee to work on a holiday, he will be
paid double time for holiday worked plus 1 day at his regular average
rate for the holiday, straight time hourly rate for day workers.
ARTICLE VI
MANAGEMENT
(85) Except as otherwise provided in the agreement, the Management has the right
to direct the working force; this includes the right to hire, suspend, or
discharge for proper cause, to loan persons in various jobs, to relieve
employees form duty due to lack of work or inability to perform the work
assigned, to eliminate or add duties to job classifications and eliminate jobs
is vested in the Company. It is agreed that in the exercise of such direction of
the working force, discrimination will not be used against employees.
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ARTICLE VII
VACATION
(86) (A) Each employee will be eligible for vacation with pay within a calendar
year, based on the number of years of service he will complete within the
calendar year, as follows:
Years of Service Weeks of Vacation with Pay
---------------- --------------------------
1 but less than 3 1
3 but less than 10 2
10 but less than 17 3
17 but less than 25 4
25 or more 5
(87) Any employee who does not complete one year's service with the Company will
not be entitled to vacation or vacation pay.
(88) (B) The vacation year will be the period between calculation dates in
sequential years. The vacation qualifying period will be the 12 months preceding
the vacation year.
(89) (C) To be eligible for a vacation in any vacation year during the term of
this agreement, the employee must:
(a) Have one year or more of continuous service.
(b) Have earnings in at least 50% of the pay periods in the vacation
qualifying period.
(90) (D) An employee with more than one (1) year of continuous service who is
ineligible for a vacation because of failure to have earnings in at least 50% of
the pay periods in the vacation qualifying period due to lay-off or sickness
shall be entitled to one week's vacation if he has had earnings in at least 50%
of the pay periods in the (12) months preceding January 15 of the vacation year.
(91) (E) A calculation date will be determined each year which will be the
earlier of the payday three weeks prior to the scheduled shutdown if any or June
25.
(92) (F) Each employee who has not completed one year of service by the
calculation date will not become entitled to vacation or to the vacation pay
calculated for him at the calculation date until he completes one year's service
with the Company. At the time he completes one year's service, whether in the
same year of the calculation date or the next, he will become entitled to one
week's vacation in the calendar year of his anniversary date and to vacation pay
calculated at the calculation date and payment will be made by the third payday
following the anniversary date.
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(93) (G) The vacation pay will be based on 40 hours per week and will be at the
employee's average straight time hourly rate (including shift premium but
excluding overtime), based on the period between January 1 and May 31 preceding
the calculation date.
(94) (H) Employees who complete their third, tenth, seventeenth or twenty-fifth
(when applicable) years of service during the calendar year but after the
calculation date applicable to them in that year will have their vacation
calculated on the calculation date as if they had completed their third, tenth,
seventeenth, or twenty-fifth (when applicable) year of service, respectively.
However, the additional vacation pay and the additional week of vacation to
which they will become entitled by reason of completion of the required years of
service will be deferred until the employee's anniversary date and payment for
the additional week will be made by the third payday following the applicable
anniversary date. At the time they reach their anniversary date they will be
eligible for the additional week of vacation. Eligibility for the additional
vacation and vacation pay will be lost if the employee does not complete the
required years of service.
(95) An employee who quits or is discharged after the vacation payment is made
will not be entitled to his or her vacation pay if the time of such quit or
discharge occurs prior to his or her anniversary date of hire.
(96) Employees will be notified at least two weeks in advance of any scheduled
vacation. Vacation requests in excess of this two weeks, will be granted on a
seniority basis provided that the vacation request is made prior to April 1st of
the vacation year. If any employee makes a request for vacation by September
30th, the Company will see that it is granted before the end of the year.
Employees who are eligible for additional vacation, at a time other than
shutdown, must notify the Company by July 1st in order to receive all vacation
monies prior to the shutdown period. Anyone who does not notify the Company by
this date, will be paid for vacation as it is used. The balance of unused
vacation will be paid the first pay of December. All vacation payments will be
in one week increments.
(97) The Company will notify the Union prior to February 1, whether or not there
will be a vacation shutdown in that calendar year. The date and duration of the
shutdown, if any, will be made known on or before March 15th. The vacation
shutdown will be scheduled in June, July, or August. Such shutdown shall be
considered vacation for all eligible employees not scheduled to work during this
period. The Company reserves the right to schedule necessary maintenance and
other employees during this vacation period, and such employees shall be
scheduled for vacation at another time. In the event there is no vacation
shutdown, vacations will be scheduled in accordance with production requirements
and the desires of the employees on a seniority basis.
(98) If the plan is to be shut down for vacation, the Company will endeavor to
provide work for those employees who are not entitled to vacation pay, but
without any obligation to do so and without regard to seniority.
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ARTICLE VIII
ADJUSTMENT OF GRIEVANCES
(99) All grievances and complaints, by either party and disputes within the
scope of this Agreement or concerning the meaning or application thereof shall
be adjusted as follows:
(100) Step 1. The employee, with or without the steward shall verbally present
the grievance to his foreman within three (3) working days after
occurrence of the event or within three (3) working days after the date
the employee learns of the event, whichever is later. The foreman shall
give his verbal answer within one working day.
(101) Step 2. If no settlement is reached, the grievance may be reduced to
writing on a form which will be provided by the Company within one
workday of the day the foreman gives his verbal answer. It shall be
signed by the grievant and presented to the foreman within (2) working
days. The foreman shall provide an answer to the employee in writing
within two (2) working days of his receipt of the grievance form.
(102) Step 3. If the grievance is not settled in the second step, it may then
be presented to the Personnel Department by the committee. Management
and the Union Committee will attempt to settle the grievances at the
next regularly scheduled meeting, provided the grievance is presented to
the Human Resources Department at least 48 hours prior to the meeting.
The Company's answer to the grievance will be given within five (5)
working days after the meeting. Any grievance which the Committee or
Company wishes to present shall be initiated at Step 3. The time limits
set forth thin this step shall be applicable to such grievances.
(103) Step 4. If the grievance is not settled in the third step, it shall be
referred to the International Representative of the Union who shall meet
with the local Union Committee and Management at the next regularly
scheduled meeting for the purpose of adjusting the grievance. Management
has fifteen (15) days from the date of the meeting to give its final
answer. On any grievance, no employee shall be entitled to relief
extending more than one (1) day prior to the date of the filing of the
written grievance.
(104) Step 5. If the Company's final answer is not satisfactory, the Union
may, no later than 15 days after the answer is given appeal the
grievance to arbitration. If no agreement can be reached within 15 days
as to the choice of an Arbitrator, one will be selected form the Federal
Mediation and Conciliation Service. The expense of arbitration will be
shared equally by the Union and the Company.
(105) The arbitrator shall have power to rule only cases where differences
exist as to interpretation of the contract. The arbitrator shall have no
power to add to or subtract from or modify any of the terms of this
agreement, or to establish or change the wage structure not to rule on
any dispute concerning job standards. He shall have no power to order
back pay in any case of shutdown, strike, or stoppage. The award shall
be rendered
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<PAGE> 15
promptly and, unless otherwise agreed by the parties or specified by
law, no later than thirty days from the date of closing the hearings, or
if oral hearings have been waived, then from the date of transmitting
the final statements and proofs to the Arbitrator.
(106) Any case appealed to an Arbitrator on which he has no power to rule
shall be referred back to the parties without decision.
(107) Failure of any of the parties to any grievance to comply with the
provisions of Steps 1, 2, 3, 4, or 5 within the time limits shall
automatically determine the grievance in favor of the other party, and
shall not be subject to re-opening. However, the time limits may be
waived by mutual agreement.
(108) The Union and the Company agree that there shall be no lockout, strike,
slowdown, stoppage or other interference with production during the
various steps of the grievance procedure unless the arbitration is not
agreed to.
ARTICLE IX
SAFETY AND HEALTH
(109) The Company shall continue to make reasonable provisions for the safety
and health of its employees at the plant during the hours of their employment.
Protective devices, wearing apparel and other equipment necessary to properly
protect employees from injury shall be provided by the Company in accordance
with the practices now prevailing in the plant.
(110) The Company agrees to recognize one (1) Local 2737-17 designated safety
committee representative who shall be included in quarterly meetings with the
local #2737-16 safety committee.
(111) All employees are required to wear safety glasses in the general plant as
a condition of employment. The Company will provide and pay for the glasses. In
addition, upon submission for a paid receipt, the Company will pay for one (1)
eye exam for employees every other year. Other safety equipment will also be
provided by the Company. Failure to wear safety glasses and other safety
equipment provided by the Company shall result in disciplinary action.
ARTICLE X
REGULATIONS COVER ABUSIVE LANGUAGE
(112) It has been agreed that it is necessary to establish certain rules,
regulations and penalties to cover the conduct of the employees of the Company
while they are on duty within the bounds of the Company's property.
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<PAGE> 16
(113) Therefore, the use of profane, abusive or threatening language toward any
employee indulging in boisterous acts that could cause or lead to injury, or
threatening injury to other employees is PROHIBITED.
(114) Any employee found guilty of indulging in any of the above acts shall be
suspended for one (1) day on the first offense, two (2) days on the second
offense, and three (3) days for the third offense, five (5) days for the fourth
defense. This rule will apply to each (12) twelve month period from the first
offense.
(115) Any employee found guilty of fighting or having possession of guns on
Company property shall be subject to discipline including discharge.
ARTICLE XI
DISCHARGE CASES
(116) In the exercise of its right set forth in Article IV, the Management
agrees that a member of the Union shall not be peremptorily discharged from and
after the date hereof, but that in all instances in which Management may
conclude that an employee's conduct may justify discharge, he shall first be
suspended. Such suspension shall be for not more than five (5) working days.
During this period of initial suspension the employee may if he believes that he
has been unjustly dealt with, request a hearing and a statement of the offense
before his foreman or the general superintendent, or the manager of the plant,
with or without a member or members of the grievance committee present as he may
choose.
(117) At such hearing the facts concerning the case shall be made available to
both parties. After such hearing and within the period of initial suspension,
Management shall conclude whether the suspension shall be converted into
discharge, or dependent upon the facts of the case, that such suspension shall
be extended or revoked. If the suspension is reversed the employee shall be
returned to employment and receive full compensation at his regular rate of pay
for the time lost, but in the event a disposition shall result in either the
affirmation or extension of the suspension or discharge of the employee, the
employee may allege a grievance which shall be handled in accordance with the
procedure of Section VIII, "Adjustment of Grievances". Should it be determined
by the Company or by an umpire in accordance with Step 5 of the Grievance
Procedure the Company shall reinstate the employee and pay full compensation at
the employee's regular rate of pay for the time lost.
(118) However, if the Arbitrator determines or the parties agree that the
employee should not be returned to employment with full back pay, the employee
may be returned to employment without back pay or with a lesser amount of back
pay, as the circumstances require.
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<PAGE> 17
ARTICLE XII
MILITARY OR NAVAL SERVICE
(119) The Company will comply with all valid laws, rules and regulations
relative to the return of employees from the armed forces of the United States
and in so doing will consult with the Union.
(120) Section 1. Vacation or Vacation Pay.
(121) An employee who at the time of leaving active employment to enter
military service of the United Sates has qualified for a vacation in the
year of such entrance and who has not received a vacation or vacation
pay shall be granted such pay.
(122) Any employee re-employed under the terms of this Article XII and who,
under the terms of Article VII. Vacations. of this agreement except for
his absence due to such military service, would have been entitled to
receive a vacation or vacation pay, shall receive such vacation or
vacation pay for the calendar year in which he is re-employed without
regard to any requirement other than an adequate record of continuous
service.
(123) Such vacation or vacation pay shall be the same vacation or vacation pay
to which such employee was entitled before entering military service,
adjusted to reflect any wage increase effective during his absence and
to reflect any additional vacation or vacation pay to which his total
continuous service, but such absence, would have entitled him.
Section 2. Encampment Pay.
(124) Any employee with one or more years of continuous service who is
required to attend an encampment of the Reserve of the Armed Forces or
the National Guard, shall be paid, for a period not to exceed two weeks
in any calendar year, the difference between the amount paid by the
government (not including travel, subsistence and quarters allowance),
and eighty (80) hours at the employee's base rate when proof of such
service is presented to the H.R. Department.
ARTICLE XIII
MISCELLANEOUS
(125) Section 1. Any classified work customarily performed by clerical employees
that is transferred outside the bargaining unit, unless proven by Management to
improve efficiency, shall be performed by a clerical employee. Nothing herein
shall be used to discriminate against any employee of the bargaining unit.
(126) Section 2. It is not the Company's intention to take work customarily
performed by clerical employees and give such work to employees outside the
bargaining unit.
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<PAGE> 18
Section 3. Printing. The Company agrees to supply copies of the Basic Agreement
to all present employees and new employees as well as the Local Union and
International Representative when they become available.
Section 4. Productivity Gainsharing. The Company and the Union recognize the
need to encourage and reward productivity. The procedure for recognizing and
rewarding improvements in productivity shall be the Productivity Gainsharing
Plan.
(127) This program shall be a plantwide plan based on the productivity of the
direct labor bargaining employees.
(128) The measure of productivity shall be an index equal to the amount of
earned direct labor hours divided by the total clock hours of direct labor
employees.
(129) New standards will be established for new products and new equipment.
Previously established Industrial Engineering practices shall be employed. The
clock hours spent on new equipment or new products shall not be use din the
computation until such time as standards are issued.
(130) Earnings computation shall be based on a comparison of the quarterly index
to the base index. The base index shall be 79.84. All bargaining unit employees
will receive a gainsharing payment equal to their straight time earnings times
the increased %. The productivity index shall be computerized for each calendar
quarter and paid out as follows:
% Of Base Payout
--------- ------
90 to 99.9 0%
100 to 108.9 75.0%
109 and up 90.0%
(131) If the quarterly index is lower than 90% of the base period index, a pay
deduction shall be computed using the same procedure. Such deduction will be
based on all productivity losses below the 90% level.
(132) The Company will exclude rework operations from any calculations (both
D.L. and earned hours), and will review and change, if necessary, long-term
non-standard conditions. Any present outside purchased blanks will still be
given credit in the gainsharing system. Product numbers will not be changed
unless it reflects base period rates.
(133) The Union Committee will designate any union member of their choice to be
the liaison with the Company in resolving/identifying problem areas. Such areas
to include excess machine downtime and improper allocation of Gainsharing bonus.
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<PAGE> 19
(134) Simonds Industries Inc. and the Union mutually encourage ongoing
productivity gains. The Company will endeavor to work with the Union to refine,
modify or improve this plan and/or devised alternate plans which promote
productivity gains.
ARTICLE XIV
INSURANCE
(135) The Company will provide insurance coverage as agreed to by the parties:
A. (6) months of paid insurance for employees on A.&S. or Workers'
Compensation.
B. (1) month of paid insurance for laid-off employees following the month
of lay-off.
C. One (1) annual hearing test for employees who are not required to be
tested due to on-the-job noise exposure. Employees must be tested prior
to the start of the shift, at lunchtime, or after work.
D. Prescription Drug Card
RETAIL CO-PAY:
Generic $10.00
Brand Name $20.00 *All 30-Day Supply
Non-Formulary $30.00
MAIL ORDER:
Generic $20.00
Brand Name $40.00 *All 90-Day Supply
Non-Formulary $50.00
E. A.&S. Insurance
Increase from $250.00/week to $275.00 week - Effective 4-6-2000 - (26
week maximum).
F. Life Insurance - $15,000
G. Monthly Contribution
Employee Only $10.00
Employee & Dependents $20.00
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<PAGE> 20
For an explanation of all insurance benefits, employees should refer to their
"Summary Description Plan" booklets.
ARTICLE XV
NO STRIKES OR LOCKOUTS
(136) Under no circumstances shall any strike, sympathy strike, stoppage of
work, walkout, slowdown, sit-down, picketing, boycott, refusal to work or other
interference with or interruptions of the normal conduct of the Employer's
business be ordered, sanctioned, permitted or enforced by the Union, its
officials, agents or stewards nor shall any lockout be ordered, sanctioned,
permitted or enforced by the Employer, its officials or agents.
ARTICLE XVI
RETIREMENT PLAN
(137) The Company will set up a retirement plan account for each hourly
employee. Annually, the Company will contribute 5% of the employee's annual
eligible compensation to that account. This contribution will increase from 5%
to 5 1/2% effective 4/6/99. A 401K Plan will be provided as a supplement to the
present retirement plan as a voluntary contribution.
ARTICLE XVII
NON-DISCRIMINATION
(138) The Company and Union agree to the policy and practice of
non-discrimination in respect to race, color, religion, sex, age (as defined in
the Federal Age Discrimination In Employment Act of 1967) or national origin.
ARTICLE XVIII
TERMINATION
This Labor Agreement shall become effective the date it is signed and shall
terminate at 11:59 P.M. on April 1st, 2001. Any wage granted by this contract as
specified in Schedule B shall be effective as of the date so specified in that
schedule. Either party shall have the right to ask the other to negotiate on the
Labor Agreement by 60 day advance notice served upon the other on or after
January 17th, 2001. Any notice to be given under this agreement shall be given
by certified mail; be completed by and at the time of mailing; and if by the
Company be addressed to the United Steelworkers of America, Five Gateway Center,
Pittsburgh, PA, and if by the Union to the Company at Newcomerstown, Ohio.
Either party may, by like written notice, change the address to which certified
mail notice to it shall be given.
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<PAGE> 21
IN WITNESS WHEREOF, the Parties, having included herein the entire agreement
between the parties relating to wages, hours and terms and conditions of
employment for employees covered by this Agreement for the duration of this
Agreement and having voluntarily and unqualifiedly waived the right to bargain
collectively with respect to any subject whether or not specified in this
Agreement for the duration of this Agreement, do hereby sign this Agreement this
5th day of April, 2001.
UNITED STEELWORKERS OF AMERICA SIMONDS INDUSTRIES, INC.
AFL-CIO LOCAL #2737-17
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<PAGE> 22
LETTER OF UNDERSTANDING
The Company shall require, as a condition of the sale of the Company or of the
Newcomerstown Facility, any successor employer to recognize the Union as the
collective bargaining representative of its employees, rehire all employees, and
abide by all the terms and conditions of this agreement.
S.A. Osler
Human Resources Mgr.
LETTER OF UNDERSTANDING
One Local Union member at a time, who is an employee of the Company, shall be
given, upon his request, a leave of absence not to exceed a period of two years,
for the purpose of serving in a political office. Such a leave of absence shall
not constitute any break in the employee's record of continuous service. Upon
written request to the Company, such an employee may be granted an extension of
his leave of absence upon mutual agreement between the Company and the Union.
S.A. Osler
Human Resources Mgr.
LETTER OF UNDERSTANDING
The Company and the Union have committed to make a concerted good faith effort
in reviewing any rising insurance costs and, as a means of controlling these
costs, will discuss items that might be of mutual benefit.
S.A. Osler
Human Resources Mgr.
LETTER OF UNDERSTANDING
PRESCRIPTION DRUG CARD
During the term of this Labor Agreement, if a generic or brandname drug does not
appear on United HealthCare's Preferred Drug List, and a covered employee or
dependent is required to pay the non-formulary price for a prescription, Simonds
will reimburse the employee for the
<PAGE> 23
difference between the non-formulary amount paid and the generic copay ($10) or
the brandname copay ($20).
The same procedure will be followed for those utilizing the mail-order option:
Simonds will pay the difference between the non-formulary amount paid and the
general copay ($20) or the brandname copay ($40).
Simonds may continue to seek further improvements in this prescription drug card
plan and make changes, as long as the employees' benefit level is either
maintained or improved, and there is no extra cost to the employee.
S.A. Osler
Human Resources Manager
SUB-CONTRACTING
In the event the Company finds it necessary to sub-contract work out or
outsource any work which is customarily performed by the bargaining unit at the
Newcomerstown Facility, it will give notice to the Union prior to
sub-contracting or outsourcing. Further, the Company will discuss the economic
and business reasons of the decisions to sub-contract or outsource with the
Union and will consider in good faith the input from that discussion prior to
sub-contracting or outsourcing the work. The Company, however, reserves the
right to sub-contract or outsource bargaining unit work, if business and
economic reasons deem it appropriate to do so.
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<PAGE> 24
SCHEDULE A
LABOR GRADES AND EVALUATED BASE RATES
Labor Effective Effective Effective
Grade 4/6/98 4/6/99 4/6/2000
----- ------ ------ --------
2 $11.40 $11.75 $12.10
3 $11.90 $12.25 $12.60
<PAGE> 25
SCHEDULE B
JOB EVALUATION
All Local Union No. 3225 bargaining unit work at the Newcomerstown Plant has
been described and evaluated by the job Evaluation Committee in accordance with
the provisions of the C.W.S. Job Description and Classification Manual, updated
as of January 1, 1963 as incorporated into the Heller Tool Division Job
Evaluation Manual dated August 17, 1971, hereinafter referred to as the Manual.
The Manual shall become effective simultaneously with the New Hourly Wage
Payment Plan.
The job description and classification for a given job will become effective
with respect to an employee when an employee's job is covered by the New Hourly
Wage Payment and shall continue in effect unless:
1) The Company changes the job content (requirements of the job, as
to the training, skill, responsibility, effort, and working
conditions) to the extent of one full job class or more;
2) The job is terminated or not occupied during a period of one
year; or
3) The description and classification are changed in accordance
with mutual agreement of officially designated representatives
of the Company and the Union.
When and if from time to time the Company at its discretion established a new
job or changes the job content (requirements of the job as to training, skill,
responsibility, effort and working conditions) of an existing job to the extent
of one full job class or more, a new job description and classification for the
new or changed job shall be established in accordance with the following
procedure:
A - The Company will develop a description and classification of the
job in accordance with the provisions of the Manual.
B - The proposed description and classification will be submitted
to the Job Evaluation Committee for approval and the standard
hourly wage scale rate for the job class to which the job is
thus assigned shall apply. At the same time copies of the
proposed description and classification shall be sent to a
designated representative of the International Union.
C - The Job Evaluation Committee shall discuss and determine the
accuracy of the job description.
D - If the Job Evaluation Committee is unable to agree upon the
description and classification, the Company shall install the
proposed classification and the standard hourly wage scale rate
for the job class to which the job is thus assigned
<PAGE> 26
shall apply. The Union Committee shall be exclusively
responsible for the filing of grievances and may at any time
within 30 days from the date of installation file a grievance
with the plant management representative designated by the
Company alleging that the job is improperly described and/or
classified under the provisions of the Manual. Thereupon the Job
Evaluation Committee shall prepare and mutually sign a
stipulation setting forth the factors and factor codings which
are in dispute. Such grievances shall be settled in accordance
with the Grievance Procedure stating at the third step.
E - In the event the parties fail to agree as provided, and no
request for review or arbitration is made within the time
provided, the classification as prepared by the Company shall be
deemed to be approved.
F - In the event the Company does not develop a new job description
and classification, the Union Committee may, if filed promptly,
process a grievance under the grievance and arbitration
procedures of this agreement requesting that a job
classification be developed and installed in accordance with the
provisions of the Manual. The resulting classification shall be
effective as of the date when the new job was established or the
change or changes installed.
G - Changed Jobs of Less than One Job Class. When the Company
changes a job but the job content is less than one (1) full job
class, a supplementary record shall be established to maintain
the job description and classification on a current basis and to
enable subsequent adjustments of the job class assignment of the
job for an accumulation of small job content changes in
accordance with the following:
a - The Company will prepare a record of such changes to supplement
the original job description and classification.
b - A copy of such record will be given to the Job Evaluation
Committee. It shall not be necessary for the Committee to
indicate their agreement or disagreement with such report unless
it is claimed that the change or changes in the job, when added
to the prior change or changes, require a change in the job
classification to the extent of one (1) full job class or more.
c - When and if the job content changes of less than one (1) full
job class accumulate to a total of (1) job class or more, the
job shall be reassigned to the appropriate job class on the
basis of such total accumulation and the reassignment shall
become effective from the date of the most recent change in job
content.
d - Anytime a job is re-evaluated, and the job class goes up less
than (1) full point, but crosses over into the next pay grade,
it will be given the higher pay grade.
e - In the event the parties fail to agree to a classification of a
new or changed job, and no request for a review or no grievance
is filed within 30 days of the most
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<PAGE> 27
recent change in job content, the classification as prepared by
the Company shall be deemed to be approved.
f - In the event the Company does not develop a new job description
and classification for a new job or a record of a changed job,
the Union Committee may file a form (Notice of Job Description
Change) outlining the changes in the job, or that a new job has
been established, and requesting that a job description and
classification or a record of job changes be developed. If the
Company then fails to develop a job description and
classification or a record of job changes, the Union Committee
may within thirty (30) days of such written request, file a
grievance under the grievance procedure requesting that a job
description and classification of such new job or
reclassification of a changed job be developed in accordance
with the Manual and the application of this section.
H - Job Evaluation Committee. The Job Evaluation Committee will
consist of four members, two selected by the Company and two
selected by the Union.
I - Jobs that are evaluated under this program will be slotted into
one of the two job classes as outlined herein.
C.W.S. Job Grade New Labor Grade
---------------- ---------------
8 - 9 1[
10 - 12 [1[
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<PAGE> 1
EXHIBIT 10.13
SIMONDS INDUSTRIES INC.
Employment Agreement
This Agreement is made this 23rd day of February, 1994, by and between
Simonds Industries Inc., a corporation organized and existing under the laws of
Delaware ["Company"] with principal offices in Fitchburg, Massachusetts, and
Harry Rogers, an individual with principal residency in Massachusetts
["Employee"].
Company hereby agrees to employ Employee, and Employee hereby accepts
such employment with Company upon the following terms and conditions:
1.0 POSITION AND TITLE. Employee's job title is Vice President of International.
He is directly responsible to the President.
2.0 TERM. The term of this Agreement shall commence on the date hereof and shall
continue evergreen hereafter until terminated by either party as provided
hereinafter; provided, however, that the provisions of Paragraph 7 shall survive
the termination of this Agreement.
3.0 BASE COMPENSATION. As Base Compensation, Employee shall be paid his current
rate of compensation upon such dates as Company customarily pays its executive
employees. Employee's Base Compensation shall be reviewed in accordance with
standard corporate policy and procedure.
4.0 BONUS. Employee shall be entitled to participate in any Executive Bonus Plan
approved by the board of directors for Company executives in general. While
there are no guarantees that there will be a bonus plan in any particular year,
or that any bonus plan will be funded at any particular level, Employee is to
participate in any such plan without discrimination.
5.0 BENEFITS. Employee shall be entitled to participate in any Executive
Benefits Program approved by the board of directors for Company executives in
general. Additionally, Employee shall be entitled to a Company vehicle approved
by the President as to make, model and equipment. Employee's participation in
any benefit program shall be at the same level of employee/employer contribution
as has been set for all participants in such plans, in accordance with
applicable law.
6. 0 TERMINATION.
(a) Employee may terminate Employee's employment under this Agreement
only upon at least ninety (90) days' prior written notice given to Company.
(b) Company may terminate this Agreement only upon at least one (1)
year's prior written notice given to Employee. Company may require that Employee
remain actively on the job for a period ending ninety (90) days from the date of
such notice, but Employee shall have no right to remain on the job upon receipt
of such notice.
(c) Company and Employee agree that these termination provisions are
fair and reasonable, and that any termination hereof in accordance herewith
shall be without recourse against the terminating party, subject to the
provisions of section 7.0, et seq., hereof.
<PAGE> 2
7.0 CONFIDENTIALITY; NON-COMPETITION. Employee acknowledges and agrees that his
position with the Company is unique and of singular importance to the success of
the Company. In connection with his performance of duties hereunder, Employee
will necessarily be entrusted with information which are confidential and
proprietary trade secrets of the Company. Employee acknowledges and agrees that
the release of any such information or materials to a third party, without the
express written consent of the Company, would cause immediate and irreparable
harm to the Company.
7.1 Employee shall not disclose to any third party any information or
materials of the Company to the extent that same are proprietary to, or the
"trade secrets" of the Company without limitation as to time.
7.2 Employee shall not compete, directly or indirectly, in North
America, as an employee, agent, consultant, owner, partner or otherwise in any
business entity, in the business engaged in by the Company and shall not offer
to deal with (in his individual capacity or on behalf of any entity in which he
is a shareholder, partner or otherwise has an ownership interest or by which he
is employed), directly or indirectly, nor deal with, directly or indirectly, any
entity or product which competes with, or materially replicates, any product or
service (or is a reasonable extension of such product or service) currently
offered by Company, for so long as Employee receives compensation and benefits
from Company and for a period of one year thereafter (provided, however, that
nothing contained herein shall prevent or restrict Employee from owning or
acquiring, directly or indirectly, not more than five percent (5 %) of the
securities of any publicly traded company for the sole purpose of passive
investment); and
7.3 Employee shall not solicit the employees or former employees of the
Company for the purpose of competing with the Company for so long as Employee is
restricted from competing with Company pursuant to the preceding paragraph.
8.0 MISCELLANEOUS.
8.1 This Agreement shall be governed by, and construed and interpreted
in accordance with, the laws of Massachusetts, whose courts shall be the
exclusive judicial forum for any and all disputes arising herefrom.
8.2 This Agreement constitutes the sole and entire, integrated
agreement by and between the parties with respect to the subject matter hereof,
and the parties agree that upon the execution and effectiveness of this
Agreement, all prior understandings and agreements (whether written or oral)
between Company and Employee regarding Employee's employment by Company shall
automatically be terminated. It may not be modified except in a writing signed
by both parties. Rights may not be assigned, nor duties delegated, hereunder
except in a writing signed by both parties.
8.3 The provisions of this Agreement are intended to be severable, and
should any court of competent jurisdiction find unenforceable any provision(s)
hereof, the same shall be stricken and the remaining provisions shall continue
to be the enforceable agreement of the parties.
8.4 All notices, requests, demands and other communications under this
Agreement shall be in writing and shall be deemed to have been duly given on the
date of service, if served
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<PAGE> 3
personally on the party to whom notice is to be given, or on the third day after
mailing, if mailed to the party to whom notice is to be given, by registered or
certified first class mail, postage prepaid, return receipt requested, or on the
date of telecopying, if sent by telecopy, or on the day after mailing, if mailed
by overnight courier service and properly addressed.
IN WITNESS WHEREOF, the parties have hereunto subscribed on the date
first above-written.
SIMONDS INDUSTRIES INC.
By: /s/ Ross B. George /s/ Harry Rogers
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Ross B. George Harry Rogers
President Employee
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<PAGE> 1
EXHIBIT 12.1
SIMONDS INDUSTRIES INC. AND CONSOLIDATED SUBSIDIARIES
STATEMENT REGARDING COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(Amount in thousands, except ratios)
<TABLE>
<CAPTION>
---------------------------- --------------------------------------------------
Predecessor Company
---------------------------- --------------------------------------------------
Six Months
Year Ended 5 Months 7 Months Year Ended Ended
---------------- Ended Ended ----------------- -----------------
1993 1994 5/26/95 12/30/95 1996 1997 6/28/97 6/27/98
------ ------ -------- -------- ------ ------ ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Earnings:
Pre-tax income from continuing
operations 5,625 8,528 (3,602) 4,731 7,054 8,752 4,619 5,755
Add fixed charges:
Interest on indebtedness 1,978 1,623 650 2,880 4,399 4,963 2,394 2,477
Portion of rents representative
of the interest factor 224 204 92 113 203 213 107 131
----- ------ ------ ----- ------ ------ ----- -----
Income as adjusted 7,827 10,355 (2,860) 7,724 11,656 13,928 7,120 8,363
Fixed charges:
Interest on indebtedness 1,978 1,623 650 2,880 4,399 4,963 2,394 2,477
Capitalized interest
Portion of rents representative
of the interest factor 224 204 92 113 203 213 107 131
----- ------ ------ ----- ------ ------ ----- -----
Total Fixed Charges 2,202 1,827 742 2,993 4,602 5,176 2,501 2,608
Ratio of earnings to fixed charges 3.6 5.7 2.6 2.5 2.7 2.8 3.2
===== ====== ====== ===== ====== ====== ===== =====
</TABLE>
<PAGE> 1
EXHIBIT 21.1
Simonds Industries Inc. [the "Company"]
DE Corporation: DOI 05/16/95; FYE: 12/31
Address: 135 Intervale Road, P.O. Box 500, Fitchburg,
Worcester County, Massachusetts 01420
SUBSIDIARIES
1. Simonds Holding Company, Inc.
DE Corporation: DOI 3/25/88; TIN: 04-3003261; FYE: 12/31
Address: c/o Delaware Trust Capital Management
900 Market Street
Wilmington, DE 19801
2. Simonds Industries FSC, Inc.
US Virgin Islands Corporation: DOI 10/3/88; FYE: 12/31
Address: c/o Chase Trade, Inc.
Chase Financial Center
11A & 11B Curacao Gade
P.O. Box 6220, St. Thomas, VI 00804
3. Simonds Industries Limited
UK Corporation: DOI 3/18/88; FYE: 12/31; Reg. No.: 2232753
Address: Unit 3 Motorway Industrial Estate
Sheffield ENG S9 1DH
4. Simonds Industries Inc.
Ontario Corporation: DOI 3/22/88; FYE: 12/31
Reg. No.: 765648 (Ontario); A-27480 (BC, 5/24/88)
Address: 65 Northland Road
Waterloo, ONT N2V 1Y8
5. Wespa Metallsagenfabrik Simonds Industries GmbH
German Corporation: DOI 11/00/92; FYE 12/31
Address: Postfach 1165
34282 Spangenberg, Germany
6. Strongridge Limited
Ontario Corporation: DOI 01/01/95; FYE 12/31
Reg. No.: 1111309
Address: 106 East Drive
Brampton, Ontario L6W 3Z4
7. Armstrong Manufacturing Company
Oregon Corporation: DOI 09/23/08; FYE 12/31
<PAGE> 2
Address: 2135 NW 21st Avenue
Portland, Oregon 97208
8. Simonds UK Holding Limited
UK Corporation: DOI 1/18/98; FYE: 12/31; Reg. No.: 3484408
Address: Unit 3 Motorway Industrial Estate
Sheffield ENG S9 1DH
9. W. Notting Limited
UK Corporation: DOI 5/23/21; FYE: 12/31; Reg. No.: 174839
Address: 67-75 Garman Road, Tottenham
London ENG N17 OUE
W. Notting Limited ("Parent") - Subsidiaries
A. Notting Sales Limited (England, doi 6/4/68)
Registration No. 933186
67-75 Garman Road, Tottenham, London N17 OUE
B. Notting Canada Inc. (Ontario, doi 3/9/77)
Registration No. 354068
C. Notting America, Inc. (New York, doi 3/26/81)
D. Servitroquel S.A. (Spain)
E. Notting de Mexico S.A. (Mexico)
F. ComputerCarton Limited (Guernsey)
-2-
<PAGE> 1
Exhibit 23.3
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Simonds Industries Inc.:
As independent public accountants, we hereby consent to the use of our
reports and to all references to our Firm included in or made a part of this
registration statement.
Arthur Andersen LLP
Boston, Massachusetts
September 1, 1998
<PAGE> 1
Exhibit 25.1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM T-1
--------
STATEMENT OF ELIGIBILITY UNDER THE
TRUST INDENTURE ACT OF 1939 OF A
CORPORATION DESIGNATED TO ACT AS TRUSTEE
Check if an Application to Determine Eligibility
of a Trustee Pursuant to Section 305(b)(2)
STATE STREET BANK AND TRUST COMPANY
(Exact name of trustee as specified in its charter)
Massachusetts 04-1867445
(Jurisdiction of incorporation or (I.R.S. Employer
organization if not a U.S. national bank) Identification No.)
225 Franklin Street, Boston, Massachusetts 02110
(Address of principal executive offices) (Zip Code)
Maureen Scannell Bateman, Esq. Executive Vice President and General Counsel
225 Franklin Street, Boston, Massachusetts 02110
(617) 654-3253
(Name, address and telephone number of agent for service)
SIMONDS INDUSTRIES INC.
(Exact name of obligor as specified in its charter)
DELAWARE ( )
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
135 INTERVALE ROAD
FITCHBURG, MASSACHUSETTS 01420
(Address of principal executive offices) (Zip Code)
10.25% SENIOR SUBORDINATED NOTES DUE 2008
<PAGE> 2
GENERAL
ITEM 1. GENERAL INFORMATION.
FURNISH THE FOLLOWING INFORMATION AS TO THE TRUSTEE:
(A) NAME AND ADDRESS OF EACH EXAMINING OR SUPERVISORY AUTHORITY TO
WHICH IT IS SUBJECT.
Department of Banking and Insurance of The Commonwealth of
Massachusetts, 100 Cambridge Street, Boston, Massachusetts.
Board of Governors of the Federal Reserve System,
Washington, D.C., Federal Deposit Insurance Corporation,
Washington, D.C.
(B) WHETHER IT IS AUTHORIZED TO EXERCISE CORPORATE TRUST POWERS.
Trustee is authorized to exercise corporate trust powers.
ITEM 2. AFFILIATIONS WITH OBLIGOR.
IF THE OBLIGOR IS AN AFFILIATE OF THE TRUSTEE, DESCRIBE EACH SUCH
AFFILIATION.
The obligor is not an affiliate of the trustee or of its
parent, State Street Corporation.
(See note on page 2.)
ITEM 3. THROUGH ITEM 15. NOT APPLICABLE.
ITEM 16. LIST OF EXHIBITS.
LIST BELOW ALL EXHIBITS FILED AS PART OF THIS STATEMENT OF
ELIGIBILITY.
1. A COPY OF THE ARTICLES OF ASSOCIATION OF THE TRUSTEE AS NOW IN
EFFECT.
A copy of the Articles of Association of the trustee, as now
in effect, is on file with the Securities and Exchange
Commission as Exhibit 1 to Amendment No. 1 to the Statement
of Eligibility and Qualification of Trustee (Form T-1) filed
with the Registration Statement of Morse Shoe, Inc. (File
No. 22-17940) and is incorporated herein by reference
thereto.
2. A COPY OF THE CERTIFICATE OF AUTHORITY OF THE TRUSTEE TO COMMENCE
BUSINESS, IF NOT CONTAINED IN THE ARTICLES OF ASSOCIATION.
A copy of a Statement from the Commissioner of Banks of
Massachusetts that no certificate of authority for the
trustee to commence business was necessary or issued is on
file with the Securities and Exchange Commission as Exhibit
2 to Amendment No. 1 to the Statement of Eligibility and
Qualification of Trustee (Form T-1) filed with the
Registration Statement of Morse Shoe, Inc. (File No.
22-17940) and is incorporated herein by reference thereto.
3. A COPY OF THE AUTHORIZATION OF THE TRUSTEE TO EXERCISE CORPORATE
TRUST POWERS, IF SUCH AUTHORIZATION IS NOT CONTAINED IN THE
DOCUMENTS SPECIFIED IN PARAGRAPH (1) OR (2), ABOVE.
A copy of the authorization of the trustee to exercise
corporate trust powers is on file with the Securities and
Exchange Commission as Exhibit 3 to Amendment No. 1 to the
Statement of Eligibility and Qualification of Trustee (Form
T-1) filed with the Registration Statement of Morse Shoe,
Inc. (File No. 22-17940) and is incorporated herein by
reference thereto.
4. A COPY OF THE EXISTING BY-LAWS OF THE TRUSTEE, OR INSTRUMENTS
CORRESPONDING THERETO.
A copy of the by-laws of the trustee, as now in effect, is
on file with the Securities and Exchange Commission as
Exhibit 4 to the Statement of Eligibility and Qualification
of Trustee (Form T-1) filed with the Registration Statement
of Eastern Edison Company (File No. 33-37823) and is
incorporated herein by reference thereto.
1
<PAGE> 3
5. A COPY OF EACH INDENTURE REFERRED TO IN ITEM 4. IF THE OBLIGOR IS
IN DEFAULT.
Not applicable.
6. THE CONSENTS OF UNITED STATES INSTITUTIONAL TRUSTEES REQUIRED BY
SECTION 321(B) OF THE ACT.
The consent of the trustee required by Section 321(b) of the
Act is annexed hereto as Exhibit 6 and made a part hereof.
7. A COPY OF THE LATEST REPORT OF CONDITION OF THE TRUSTEE PUBLISHED
PURSUANT TO LAW OR THE REQUIREMENTS OF ITS SUPERVISING OR
EXAMINING AUTHORITY.
A copy of the latest report of condition of the trustee
published pursuant to law or the requirements of its
supervising or examining authority is annexed hereto as
Exhibit 7 and made a part hereof.
NOTES
In answering any item of this Statement of Eligibility which relates
to matters peculiarly within the knowledge of the obligor or any underwriter for
the obligor, the trustee has relied upon information furnished to it by the
obligor and the underwriters, and the trustee disclaims responsibility for the
accuracy or completeness of such information.
The answer furnished to Item 2. of this statement will be amended, if
necessary, to reflect any facts which differ from those stated and which would
have been required to be stated if known at the date hereof.
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939, as
amended, the trustee, State Street Bank and Trust Company, a corporation
organized and existing under the laws of The Commonwealth of Massachusetts, has
duly caused this statement of eligibility to be signed on its behalf by the
undersigned, thereunto duly authorized, all in the City of Boston and The
Commonwealth of Massachusetts, on AUGUST 12, 1998.
STATE STREET BANK AND TRUST COMPANY
By: /s/ Robert J. Dunn
--------------------------------
NAME : Robert J. Dunn
TITLE : Vice President
2
<PAGE> 4
EXHIBIT 6
CONSENT OF THE TRUSTEE
Pursuant to the requirements of Section 321(b) of the Trust Indenture
Act of 1939, as amended, in connection with the proposed issuance by SIMONDS
INDUSTRIES INC. of its 10.25% SENIOR SUBORDINATED NOTES DUE 2008, we hereby
consent that reports of examination by Federal, State, Territorial or District
authorities may be furnished by such authorities to the Securities and Exchange
Commission upon request therefor.
STATE STREET BANK AND TRUST COMPANY
By: /s/ Robert J. Dunn
-------------------------------
NAME: Robert J. Dunn
TITLE : Vice President
DATED: AUGUST 12, 1998
3
<PAGE> 5
EXHIBIT 7
Consolidated Report of Condition of State Street Bank and Trust Company,
Massachusetts and foreign and domestic subsidiaries, a state banking institution
organized and operating under the banking laws of this commonwealth and a member
of the Federal Reserve System, at the close of business MARCH 31, 1998,
published in accordance with a call made by the Federal Reserve Bank of this
District pursuant to the provisions of the Federal Reserve Act and in accordance
with a call made by the Commissioner of Banks under General Laws, Chapter 172,
Section 22(a).
<TABLE>
<CAPTION>
Thousands of
ASSETS Dollars
<S> <C>
Cash and balances due from depository institutions:
Noninterest-bearing balances and currency and coin .............................. 1,144,309
Interest-bearing balances ....................................................... 9,914,704
Securities .................................................................................. 10,062,052
Federal funds sold and securities purchased
under agreements to resell in domestic offices
of the bank and its Edge subsidiary ............................................. 8,073,970
Loans and lease financing receivables:
Loans and leases, net of unearned income ................ 6,433,627
Allowance for loan and lease losses ....................... 88,820
Allocated transfer risk reserve................................... 0
Loans and leases, net of unearned income and allowances ......................... 6,344,807
Assets held in trading accounts ............................................................. 1,117,547
Premises and fixed assets ................................................................... 453,576
Other real estate owned ..................................................................... 100
Investments in unconsolidated subsidiaries .................................................. 44,985
Customers' liability to this bank on acceptances outstanding ................................ 66,149
Intangible assets ........................................................................... 263,249
Other assets................................................................................. 1,066,572
-----------
Total assets ................................................................................ 38,552,020
===========
LIABILITIES
Deposits:
In domestic offices ............................................................. 9,266,492
Noninterest-bearing .............................. 6,824,432
Interest-bearing .................................... 2,442,060
In foreign offices and Edge subsidiary .......................................... 14,385,048
Noninterest-bearing .............................. 75,909
Interest-bearing .................................... 14,309,139
Federal funds purchased and securities sold under
agreements to repurchase in domestic offices of
the bank and of its Edge subsidiary ............................................. 9,949,994
Demand notes issued to the U.S. Treasury and Trading Liabilities ............................ 171,783
Trading liabilities.......................................................................... 1,078,189
Other borrowed money ........................................................................ 406,583
Subordinated notes and debentures ........................................................... 0
Bank's liability on acceptances executed and outstanding .................................... 66,149
Other liabilities ........................................................................... 878,947
Total liabilities ........................................................................... 36,203,185
-----------
EQUITY CAPITAL
Perpetual preferred stock and related surplus................................................ 0
Common stock ................................................................................ 29,931
Surplus ..................................................................................... 450,003
Undivided profits and capital reserves/Net unrealized holding gains (losses) ................ 1,857,021
Net unrealized holding gains (losses) on available-for-sale securities....................... 18,136
Cumulative foreign currency translation adjustments ........................................ (6,256)
Total equity capital ........................................................................ 2,348,835
------------
Total liabilities and equity capital ........................................................ 38,552,020
------------
</TABLE>
4
<PAGE> 6
I, Rex S. Schuette, Senior Vice President and Comptroller of the above named
bank do hereby declare that this Report of Condition has been prepared in
conformance with the instructions issued by the Board of Governors of the
Federal Reserve System and is true to the best of my knowledge and belief.
Rex S. Schuette
We, the undersigned directors, attest to the correctness of this Report of
Condition and declare that it has been examined by us and to the best of our
knowledge and belief has been prepared in conformance with the instructions
issued by the Board of Governors of the Federal Reserve System and is true and
correct.
David A. Spina
Marshall N. Carter
Truman S. Casner
5
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0001067919
<NAME> SIMONDS INDUSTRIES INC.
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C> <C>
<PERIOD-TYPE> YEAR 6-MOS
<FISCAL-YEAR-END> DEC-27-1997 JAN-02-1999
<PERIOD-START> DEC-28-1996 DEC-28-1997
<PERIOD-END> DEC-27-1997 JUN-27-1998
<EXCHANGE-RATE> 1 1
<CASH> 1,255 835
<SECURITIES> 0 0
<RECEIVABLES> 16,185 18,842
<ALLOWANCES> 806 924
<INVENTORY> 22,576 28,697
<CURRENT-ASSETS> 43,277 51,942
<PP&E> 34,964 39,611
<DEPRECIATION> 5,308 6,655
<TOTAL-ASSETS> 95,343 108,594
<CURRENT-LIABILITIES> 21,626 28,216
<BONDS> 51,692 59,882
0 0
0 0
<COMMON> 1 1
<OTHER-SE> 21,614 24,703
<TOTAL-LIABILITY-AND-EQUITY> 95,343 108,594
<SALES> 114,182 62,641
<TOTAL-REVENUES> 114,182 62,641
<CGS> 78,798 42,281
<TOTAL-COSTS> 78,798 42,281
<OTHER-EXPENSES> 21,149 11,961
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 4,963 2,477
<INCOME-PRETAX> 8,752 5,755
<INCOME-TAX> 3,751 2,441
<INCOME-CONTINUING> 5,001 3,314
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 5,001 3,314
<EPS-PRIMARY> 0 0
<EPS-DILUTED> 0 0
</TABLE>
<PAGE> 1
EXHIBIT 99.1
LETTER OF TRANSMITTAL
SIMONDS INDUSTRIES, INC.
OFFER TO EXCHANGE ITS
10 1/4% SENIOR SUBORDINATED NOTES DUE JULY 1, 2008
WHICH HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
FOR AN EQUAL PRINCIPAL AMOUNT OF ITS
10 1/4% SENIOR SUBORDINATED NOTES DUE JULY 1, 2008
WHICH HAVE NOT BEEN SO REGISTERED
PURSUANT TO THE PROSPECTUS
DATED SEPTEMBER , 1998
The Exchange Agent for the Exchange Offer is:
STATE STREET BANK AND TRUST COMPANY
By Registered or Certified Mail
or Hand or Overnight Delivery:
State Street Bank and Trust Company
Two International Place
Fourth Floor
Boston, MA 02110
Attention: Corporate Trust Department
Facsimile Transmissions:
(Eligible Institutions Only)
[______________]
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET FORTH
ABOVE OR TRANSMISSION OF THIS LETTER OF TRANSMITTAL VIA FACSIMILE TO A NUMBER
OTHER THAN AS SET FORTH ABOVE DOES NOT CONSTITUTE A VALID DELIVERY.
THE INSTRUCTIONS CONTAINED HEREIN SHOULD BE READ CAREFULLY BEFORE THIS LETTER OF
TRANSMITTAL IS COMPLETED.
THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M., NEW YORK CITY
TIME, ON _______, 1998, UNLESS THE OFFER IS EXTENDED.
Capitalized terms used but not defined herein shall have the same meaning given
them in the Prospectus (as defined below).
This Letter of Transmittal is to be completed by holders of Original Notes (as
defined below) either if Original Notes are to be forwarded herewith or if
tenders of Original Notes are to be made by book-entry transfer to an account
maintained by State Street Bank and Trust Company (the "Exchange Agent") at The
Depository Trust Company ("DTC") pursuant to the procedures set forth in "The
Exchange Offer--Procedures for Tendering" in the Prospectus and an Agent's
Message (as defined herein) is not delivered.
<PAGE> 2
Holders of Original Notes whose certificates (the "Certificates") for such
Original Notes are not immediately available or who cannot deliver their
Certificates and all other required documents to the Exchange Agent on or prior
to the Expiration Date (as defined in the Prospectus) or who cannot complete the
procedures for book-entry transfer on a timely basis, must tender their Original
Notes according to the guaranteed delivery procedures set forth in "The Exchange
Offer--Procedures for Tendering" in the Prospectus.
DELIVERY OF DOCUMENTS TO DTC DOES NOT CONSTITUTE DELIVERY TO THE EXCHANGE AGENT.
NOTE: SIGNATURES MUST BE PROVIDED BELOW
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
ALL TENDERING HOLDERS COMPLETE THIS BOX:
DESCRIPTION OF ORIGINAL NOTES TENDERED
--------------------------------------
IF BLANK, PLEASE PRINT NAME AND ADDRESS ORIGINAL NOTES
OF REGISTERED HOLDER. (ATTACH ADDITIONAL LIST)
--------------------- ------------------------
PRINCIPAL AMOUNT
CERTIFICATE OF ORIGINAL NOTES
NUMBER(S)* TENDERED**
----------
TOTAL AMOUNT
TENDERED:
---------
* Need not be completed by book-entry holders. ** All Original Notes held shall
be deemed tendered unless a lesser number is specified in this column.
-2-
<PAGE> 3
(BOXES BELOW TO BE CHECKED BY ELIGIBLE INSTITUTIONS ONLY)
[_] CHECK HERE IF TENDERED ORIGINAL NOTES ARE BEING DELIVERED BY BOOK-ENTRY
TRANSFER MADE TO THE ACCOUNT MAINTAINED BY THE EXCHANGE AGENT WITH DTC AND
COMPLETE THE FOLLOWING:
Name of Tendering Institution _______________________________________________
DTC Account Number __________________________________________________________
Transaction Code Number _____________________________________________________
[_] CHECK HERE AND ENCLOSE A PHOTOCOPY OF THE NOTICE OF GUARANTEED DELIVERY IF
TENDERED ORIGINAL NOTES ARE BEING DELIVERED PURSUANT TO A NOTICE OF GUARANTEED
DELIVERY PREVIOUSLY SENT TO THE EXCHANGE AGENT AND COMPLETE THE FOLLOWING:
Name(s) of Registered Holder(s) ___________________________________________
Window Ticket Number (if any) _____________________________________________
Date of Execution of Notice of Guaranteed Delivery ________________________
Name of Institution which Guaranteed Delivery _____________________________
If Guaranteed Delivery is to be made by Book-Entry Transfer:
Name of Tendering Institution _____________________________________________
DTC Account Number ________________________________________________________
Transaction Code Number ___________________________________________________
[_] CHECK HERE IF TENDERED BY BOOK-ENTRY TRANSFER AND NON-EXCHANGED ORIGINAL
NOTES ARE TO BE RETURNED BY CREDITING THE DTC ACCOUNT NUMBER SET FORTH ABOVE.
[_] CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10 ADDITIONAL
COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS THERETO.
Name: _______________________________________________________________________
Address: ____________________________________________________________________
-3-
<PAGE> 4
Ladies and Gentlemen:
The undersigned hereby tenders to Simonds Industries Inc., a Delaware
corporation (the "Company"), the above described principal amount of the
Company's outstanding 10 1/4% Senior Subordinated Notes due July 1, 2008 (the
"Original Notes") in exchange for a like principal amount of the Company's
10 1/4% Senior Subordinated Notes due July 1, 2008 (the "Exchange Notes") which
have been registered under the Securities Act of 1933, as amended (the
"Securities Act"), upon the terms and subject to the conditions set forth in the
Prospectus dated , 1998 (as the same may be amended or supplemented from time to
time, the "Prospectus"), receipt of which is acknowledged, and in this Letter of
Transmittal (which, together with the Prospectus, constitutes the "Exchange
Offer").
Subject to and effective upon the acceptance for exchange of all or any portion
of the Original Notes tendered herewith in accordance with the terms and
conditions of the Exchange Offer (including, if the Exchange Offer is extended
or amended, the terms and conditions of any such extension or amendment), the
undersigned hereby sells, assigns and transfer to or upon the order of the
Company all right, title and interest in and to such Original Notes as are being
tendered herewith. The undersigned hereby irrevocably constitutes and appoints
the Exchange Agent as its agent and attorney-in-fact (with full knowledge that
the Exchange Agent is also acting as agent of the Company in connection with the
Exchange Offer) with respect to the tendered Original Notes, with full power of
substitution (such power of attorney being deemed to be an irrevocable power
coupled with an interest), subject only to the right of withdrawal described in
the Prospectus, to (i) deliver Certificates for Original Notes to the Company
together with all accompanying evidences of transfer and authenticity to, or
upon the order of, the Company, upon receipt by the Exchange Agent, as the
undersigned's agent, of the Exchange Notes to be issued in exchange for such
Original Notes, (ii) present Certificates for such Original Notes for transfer,
and to transfer the Original Notes on the books of the Company, and (iii)
receive for the account of the Company all benefits and otherwise exercise all
rights of beneficial ownership of such Original Notes, all in accordance with
the terms and conditions of the Exchange Offer.
THE UNDERSIGNED HEREBY REPRESENTS AND WARRANTS THAT THE UNDERSIGNED HAS FULL
POWER AND AUTHORITY TO TENDER, EXCHANGE, SELL, ASSIGN AND TRANSFER THE ORIGINAL
NOTES TENDERED HEREBY AND THAT, WHEN THE SAME ARE ACCEPTED FOR EXCHANGE, THE
COMPANY WILL ACQUIRE GOOD, MARKETABLE AND UNENCUMBERED TITLE THERETO, FREE AND
CLEAR OF ALL LIENS, RESTRICTIONS, CHARGES AND ENCUMBRANCES, AND THAT THE
ORIGINAL NOTES TENDERED HEREBY ARE NOT SUBJECT TO ANY ADVERSE CLAIMS OR PROXIES.
THE UNDERSIGNED WILL, UPON REQUEST, EXECUTE AND DELIVER ANY ADDITIONAL DOCUMENTS
DEEMED BY THE COMPANY OR THE EXCHANGE AGENT TO BE NECESSARY OR DESIRABLE TO
COMPLETE THE EXCHANGE, ASSIGNMENT AND TRANSFER OF THE ORIGINAL NOTES TENDERED
HEREBY, AND THE UNDERSIGNED WILL COMPLY WITH ITS OBLIGATIONS UNDER THE
REGISTRATION RIGHTS AGREEMENT. THE UNDERSIGNED HAS READ AND AGREES TO ALL OF THE
TERMS OF THE EXCHANGE OFFER.
The name(s) and address(es) of the registered holder(s) of the Original Notes
tendered hereby should be printed above, if they are not already set forth
above, as they appear on the Certificates representing such Original Notes. The
Certificate number(s) and the Original Notes that the undersigned wishes to
tender should be indicated in the appropriate boxes above.
If any tendered Original Notes are not exchanged pursuant to the Exchange Offer
for any reason, or if Certificates are submitted for more Original Notes than
are tendered or accepted for exchange, Certificates for such nonexchanged or
nontendered Original Notes will be returned (or, in the case of Original Notes
tendered by
-4-
<PAGE> 5
book-entry transfer, such Original Notes will be credited to an account
maintained at DTC), without expense to the tendering holder, promptly following
the expiration or termination of the Exchange Offer.
If the undersigned is a broker-dealer holding Original Notes acquired for its
own account as a result of market-making activities or other trading activities,
it agrees to deliver a prospectus meeting the requirements of the Securities Act
in connection with any resale of Exchange Notes received in respect of such
Original Notes pursuant to the Exchange Offer.
The undersigned understands that tenders of Original Notes pursuant to any one
of the procedures described in "The Exchange Offer--Procedures for Tendering" in
the Prospectus and in the instructions will, upon the Company's acceptance for
exchange of such tendered Original Notes, constitute a binding agreement between
the undersigned and the Company upon the terms and subject to the conditions of
the Exchange Offer. The undersigned recognizes that, under certain circumstances
set forth in the Prospectus, the Company may not be required to accept for
exchange any of the Original Notes tendered hereby.
Unless otherwise indicated herein in the box entitled "Special Issuance
Instructions" below, the undersigned hereby directs that the Exchange Notes be
issued in the name(s) of the undersigned or, in the case of a book-entry
transfer of Original Notes, that such Exchange Notes be credited to the account
indicated above maintained at DTC. If applicable, substitute Certificates
representing Original Notes not exchanged or not accepted for exchange will be
issued to the undersigned or, in the case of a book-entry transfer of Original
Notes, will be credited to the account indicated above maintained at DTC.
Similarly, unless otherwise indicated under "Special Delivery Instructions,"
please deliver Exchange Notes to the undersigned at the address shown below the
undersigned's signature.
BY TENDERING ORIGINAL NOTES AND EXECUTING THIS LETTER OF TRANSMITTAL, THE
UNDERSIGNED HEREBY REPRESENTS AND AGREES THAT (I) THE UNDERSIGNED IS NOT AN
"AFFILIATE" OF THE COMPANY, (II) ANY EXCHANGE NOTES TO BE RECEIVED BY THE
UNDERSIGNED ARE BEING ACQUIRED IN THE ORDINARY COURSE OF ITS BUSINESS, FOR THE
UNDERSIGNED'S OWN ACCOUNT, FOR INVESTMENT AND NOT WITH A VIEW TO OR FOR SALE IN
CONNECTION WITH ANY DISTRIBUTION OF THE EXCHANGE NOTES, (III) THE UNDERSIGNED
HAS NO ARRANGEMENT OR UNDERSTANDING WITH ANY PERSON TO PARTICIPATE IN THE
DISTRIBUTION (WITHIN THE MEANING OF THE SECURITIES ACT) OF EXCHANGE NOTES TO BE
RECEIVED IN THE EXCHANGE OFFER, (IV) IF THE UNDERSIGNED IS NOT A BROKER-DEALER,
THE UNDERSIGNED IS NOT ENGAGED IN, AND DOES NOT INTEND TO ENGAGE IN, A
DISTRIBUTION (WITHIN THE MEANING OF THE SECURITIES ACT) OF SUCH EXCHANGE NOTES,
AND (V) THE UNDERSIGNED WILL PROVIDE THE COMPANY WITH ANY ADDITIONAL
REPRESENTATIONS SO REQUESTED IN ORDER FOR THE COMPANY TO ENSURE COMPLIANCE WITH
APPLICABLE STATE SECURITIES OR "BLUE SKY" LAWS. ANY HOLDER OF ORIGINAL NOTES
WHICH IS NOT A BROKER-DEALER, AND WHICH IS USING THE EXCHANGE OFFER TO
PARTICIPATE IN A DISTRIBUTION (WITHIN THE MEANING OF THE SECURITIES ACT) OF
EXCHANGE NOTES, IS HEREBY NOTIFIED (1) THAT IT WILL NOT BE ABLE TO RELY ON THE
POSITION OF THE STAFF OF THE DIVISION OF CORPORATE FINANCE OF THE SECURITIES AND
EXCHANGE COMMISSION (THE "STAFF") SET FORTH IN EXXON CAPITAL HOLDINGS
CORPORATION (AVAIL. APRIL 13, 1989) AND SIMILAR LETTERS AND (2) THAT IT MUST
COMPLY WITH THE REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF THE
SECURITIES ACT IN CONNECTION WITH ANY RESALE OF EXCHANGE NOTES.
-5-
<PAGE> 6
IF THE UNDERSIGNED IS NOT A BROKER-DEALER, THE UNDERSIGNED REPRESENTS THAT IT IS
NOT ENGAGED IN, AND DOES NOT INTEND TO ENGAGE IN, A DISTRIBUTION OF EXCHANGE
NOTES. ANY HOLDER OF ORIGINAL NOTES WHICH IS A BROKER-DEALER BY TENDERING
ORIGINAL NOTES PURSUANT TO THE EXCHANGE OFFER AND EXECUTING THIS LETTER OF
TRANSMITTAL, REPRESENTS AND AGREES, CONSISTENT WITH CERTAIN INTERPRETIVE LETTERS
ISSUED BY THE STAFF TO THIRD PARTIES, THAT (A) SUCH ORIGINAL NOTES HELD BY THE
BROKER-DEALER ARE HELD ONLY AS A NOMINEE, OR (B) SUCH ORIGINAL NOTES WERE
ACQUIRED BY SUCH BROKER-DEALER FOR ITS OWN ACCOUNT AS A RESULT OF MARKET-MAKING
ACTIVITIES OR OTHER TRADING ACTIVITIES AND IT WILL DELIVER THE PROSPECTUS (AS
AMENDED OR SUPPLEMENTED FROM TIME TO TIME) MEETING THE REQUIREMENTS OF THE
SECURITIES ACT IN CONNECTION WITH ANY RESALE OF SUCH EXCHANGE NOTES (PROVIDED
THAT, BY SO ACKNOWLEDGING AND BY DELIVERING A PROSPECTUS, SUCH BROKER-DEALER
WILL NOT BE DEEMED TO ADMIT THAT IT IS AN "UNDERWRITER" WITHIN THE MEANING OF
THE SECURITIES ACT).
ALL RESALES MUST BE MADE IN COMPLIANCE WITH APPLICABLE STATE SECURITIES OR "BLUE
SKY" LAWS. SUCH COMPLIANCE MAY REQUIRE THAT THE EXCHANGE NOTES BE REGISTERED OR
QUALIFIED IN A PARTICULAR STATE OR THAT THE RESALE BE MADE BY OR THROUGH A
LICENSED BROKER-DEALER, UNLESS EXEMPTIONS FROM THESE REQUIREMENTS ARE AVAILABLE.
THE COMPANY ASSUMES NO RESPONSIBILITY WITH REGARD TO COMPLIANCE WITH SUCH
REQUIREMENTS.
THE EXCHANGE OFFER IS NOT BEING MADE TO, NOR WILL THE COMPANY ACCEPT SURRENDERS
FOR EXCHANGE FROM, HOLDERS OF ORIGINAL NOTES IN ANY JURISDICTION IN WHICH THE
EXCHANGE OFFER OR THE ACCEPTANCE THEREOF WOULD NOT BE IN COMPLIANCE WITH THE
SECURITIES OR BLUE SKY LAWS OF SUCH JURISDICTION.
[ORIGINAL NOTES MAY ONLY BE TENDERED BY HOLDERS IN NEW MEXICO AND PENNSYLVANIA
WHO ARE HOLDERS OF THE KIND DESCRIBED IN APPENDIX A HERETO. BY SIGNING THIS
LETTER OF TRANSMITTAL, SUCH HOLDERS WILL BE DEEMED TO REPRESENT THAT THEY ARE
HOLDERS OF THE KIND DESCRIBED IN APPENDIX A HERETO. ]
The Company has agreed that, subject to the provisions of the Registration
Rights Agreement, the Prospectus, as it may be amended or supplemented from time
to time, may be used by a broker-dealer in connection with resales of Exchange
Notes received in exchange for Original Notes, where such Original Notes were
acquired by such broker-dealer for its own account as a result of market- making
activities or other trading activities, for a period ending 90 days after the
Expiration Date (subject to extension under certain limited circumstances
described in the Prospectus) or, if earlier, when all such Exchange Notes have
been disposed of by such broker-dealer. In that regard, each broker-dealer who
acquired Original Notes for its own account and as a result of market-making or
other trading activities, by tendering such Original Notes and executing this
letter of transmittal, agrees that, upon receipt of notice from the Company of
the occurrence of any event or the discovery of any fact which makes any
statement contained or incorporated by reference therein, in light of the
circumstances under which they were made, misleading or of the occurrence of
certain other events specified in the Registration Rights Agreement, such
broker-dealer will suspend the sale of Exchange Notes pursuant to the Prospectus
until the Company has amended or supplemented the Prospectus to correct such
misstatement or omission and has furnished copies of the amended or supplemented
Prospectus to the broker-dealer or the
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<PAGE> 7
Company given notice that the sale of the Exchange Notes may be resumed, as the
case may be. If the Company gives such notice to suspend the sale of the
Exchange Notes, it shall extend the 90-day period referred to above during which
broker-dealers are entitled to use the Prospectus in connection with the resale
of Exchange Notes by the number of days during the period from and including the
date of the giving of such notice to and including the date when broker-dealers
shall have received copies of the supplemented or amended Prospectus necessary
to permit resales of the Exchange Notes or to and including the date on which
the Company has given notice that the sale of Exchange Notes may be resumed, as
the case may be. As a result, a broker-dealer who intends to use the Prospectus
in connection with resales of Exchange Notes received in exchange for Original
Notes pursuant to the Exchange Offer must notify the Company, or cause the
Company to be notified, on or prior to the Expiration Date, that it is a broker-
dealer. Such notice may be given in the space provided above or may be delivered
to the Exchange Agent at the address set forth in the Prospectus under "The
Exchange Offer--Exchange Agent."
All authority herein conferred or agreed to be conferred in this Letter of
Transmittal shall survive the death or incapacity of the undersigned and any
obligation of the undersigned hereunder shall be binding upon the heirs,
executors, administrators, personal representatives, trustees in bankruptcy,
legal representatives, successors and assigns of the undersigned. Except as
stated in the Prospectus, this tender is irrevocable.
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<PAGE> 8
HOLDER(S) SIGN HERE
(SEE INSTRUCTIONS 2, 5 AND 6)
(PLEASE COMPLETE SUBSTITUTE FORM W-9 BELOW)
(NOTE: SIGNATURE(S) MUST BE GUARANTEED IF REQUIRED BY INSTRUCTION 2)
Must be signed by registered holder(s) exactly as name(s) appear(s) on
Certificate(s) for the Original Notes hereby tendered or on a security
position listing, or by any person(s) authorized to become the registered
holder(s) by endorsements and documents transmitted herewith (including
such opinions of counsel, certificates and other information as may be
required by the Company for the Original Notes to comply with any
restrictions on transfer applicable to the Original Notes). If signature is
by an attorney-in-fact, executor, administrator, trustee, guardian, officer
of a corporation or another acting in a fiduciary capacity or
representative capacity, please set forth the signer's full title. See
Instruction 5.
(SIGNATURE(S) OF HOLDER(S))
Date _______________________ , 1998
Name(s) _____________________________________________________________________
(PLEASE PRINT)
Capacity or Title ___________________________________________________________
Address _____________________________________________________________________
(INCLUDE ZIP CODE)
Area Code(s) and Telephone Number ___________________________________________
TAX IDENTIFICATION OR SOCIAL SECURITY NUMBER(S) _____________________________
GUARANTEE OF SIGNATURE(S)
(SEE INSTRUCTIONS 2 AND 5)
Authorized Signature ________________________________________________________
Name ________________________________________________________________________
(PLEASE PRINT)
Date _______________________ , 1998
Capacity or Title ___________________________________________________________
Name of Firm ________________________________________________________________
Address _____________________________________________________________________
(INCLUDE ZIP CODE)
Area Code(s) and Telephone Number ___________________________________________
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<PAGE> 9
SPECIAL ISSUANCE INSTRUCTIONS SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 1, 5 AND 6) (SEE INSTRUCTIONS 1, 5 AND 6)
To be completed ONLY if Exchange To be completed ONLY if Exchange
Notes or any Original Notes that Notes or any Original Notes that
are not tendered are to be issued are not tendered are to be sent to
in the name of someone other than someone other than the registered
the registered holder of the holder of the Original Notes whose
Original Notes whose name(s) name(s) appear(s) above, or to the
appear(s) above. registered holder(s) at an address
other than that shown above.
ISSUE: MAIL:
[_] Exchange Notes to: [_] Exchange Notes to:
[_] Original Notes not tendered [_] Original Notes not tendered
to: to:
Name(s): _________________________ Name(s): _________________________
(PLEASE PRINT)
__________________________________
(PLEASE PRINT)
Address: _________________________ Address: _________________________
(ZIP CODE) _______________________ (ZIP CODE) _______________________
TAXPAYER IDENTIFICATION OR SOCIAL
SECURITY NUMBER ___________________
(SEE ENCLOSED SUBSTITUTE FORM W-9)
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<PAGE> 10
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE EXCHANGE OFFER
1. DELIVERY OF LETTER OF TRANSMITTAL AND CERTIFICATES; GUARANTEED DELIVERY
PROCEDURES. This Letter of Transmittal is to be completed either if (a) tenders
are to be made pursuant to the procedures for tender by book-entry transfer set
forth in "The Exchange Offer--Procedures for Tendering" in the Prospectus and an
Agent's Message is not delivered or (b) Certificates are to be forwarded
herewith. Timely confirmation of a book-entry transfer of such Original Notes
into the Exchange Agent's account at DTC, or Certificates as well as this Letter
of Transmittal (or facsimile thereof), properly completed and duly executed,
with any required signature guarantees, and any other documents required by this
Letter of Transmittal, must be received by the Exchange Agent at its addresses
set forth herein on or prior to the Expiration Date. Tenders by book-entry
transfer may also be made by delivering an Agent's Message in lieu of this
Letter of Transmittal. The term "Agent's Message" means a message, transmitted
by DTC to and received by the Exchange Agent and forming a part of a book-entry
confirmation, which states that DTC has received an express acknowledgment from
the tendering Participant, which acknowledgment states that such Participant has
received and agrees to be bound by the Letter of Transmittal and that the
Company may enforce the Letter of Transmittal against such Participant. The term
"book-entry confirmation" means a timely confirmation of book-entry transfer of
Original Notes into the Exchange Agent's account at DTC.
Holders who wish to tender their Original Notes and (i) who cannot deliver their
Original Notes, this Letter of Transmittal and all other required documents to
the Exchange Agent on or prior to the Expiration Date or (ii) whose Original
Notes are not immediately available may tender their Original Notes by properly
completing and duly executing a Notice of Guaranteed Delivery pursuant to the
guaranteed delivery procedures set forth in "The Exchange Offer--Guaranteed
Delivery Procedures" in the Prospectus. Pursuant to such procedures: (a) such
tender must be made through an Eligible Institution (as defined below); (b) on
or prior to the applicable Expiration Date, the Exchange Agent must receive from
such Eligible Institution a properly completed and duly executed Notice of
Guaranteed Delivery (by mail, hand delivery or facsimile transmission) setting
forth the name and address of the holder, the certificate number(s) of such
Original Notes and the principal amount of the Original Notes being tendered,
stating that the tender is being made thereby and guaranteeing that, within five
business days after the applicable Expiration Date, the applicable Letter of
Transmittal together with the certificate(s) representing the Original Notes (or
Book-Entry Confirmation) and any other documents required by the applicable
Letter of Transmittal will be delivered by the Eligible Institution to the
Exchange Agent; and (c) such properly completed and executed Letter of
Transmittal, as well as the Certificate(s) representing the tendered Original
Notes in proper form for transfer (or Book-Entry Confirmation) and all other
documents required by the Letter of Transmittal are received by the Exchange
Agent within five business days after the applicable Expiration Date, all as
provided in "The Exchange Offer--Guaranteed Delivery Procedures" in the
Prospectus.
The Notice of Guaranteed Delivery may be delivered by mail, hand delivery or
facsimile transmission to the Exchange Agent, and must include a guarantee by an
Eligible Institution in the form set forth in such Notice. For Original Notes to
be properly tendered pursuant to the guaranteed delivery procedure, the Exchange
Agent must receive a Notice of Guaranteed Delivery on or prior to the Expiration
Date. As used herein and in the Prospectus, "Eligible Institution" means a firm
or other entity identified in Rule 17Ad-15 under the Exchange Act as "an
eligible guarantor institution," including (as such terms are defined therein)
(i) a bank; (ii) a broker, dealer, municipal securities broker or dealer or
government securities broker or dealer; (iii) a credit union; (iv) a national
securities exchange, registered securities association or clearing agency; or
(v) a savings association that is a participant in a Securities Transfer
Association.
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<PAGE> 11
THE METHOD OF DELIVERY OF CERTIFICATES, THIS LETTER OF TRANSMITTAL AND ALL OTHER
REQUIRED DOCUMENTS IS AT THE OPTION AND SOLE RISK OF THE TENDERING HOLDER AND
THE DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE EXCHANGE
AGENT. IF DELIVERY IS BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED,
PROPERLY INSURED, OR OVERNIGHT DELIVERY SERVICE IS RECOMMENDED. IN ALL CASES,
SUFFICIENT TIME SHOULD BE ALLOWED TO ENSURE TIMELY DELIVERY.
THE COMPANY WILL NOT ACCEPT ANY ALTERNATIVE, CONDITIONAL OR CONTINGENT TENDERS.
EACH TENDERING HOLDER, BY EXECUTION OF A LETTER OF TRANSMITTAL (OR FACSIMILE
THEREOF OR AGENT'S MESSAGE IN LIEU THEREOF), WAIVES ANY RIGHT TO RECEIVE ANY
NOTICE OF THE ACCEPTANCE OF SUCH TENDER.
2. GUARANTEE OF SIGNATURES. No signature guarantee on this Letter of Transmittal
is required if:
a. this Letter of Transmittal is signed by the registered holder (which
term, for purposes of this document, shall include any participant in DTC
whose name appears on a security position listing as the owner of the
Original Notes) of Original Notes tendered herewith, unless such holder(s)
has completed either the box entitled "Special Issuance Instructions" or the
box entitled "Special Delivery Instructions" above, or
b. such Original Notes are tendered for the account of a firm that is an
Eligible Institution.
In all other cases, an Eligible Institution must guarantee the signature(s)
on this Letter of Transmittal. See Instruction 5.
3. INADEQUATE SPACE. If the space provided in the box captioned "Description of
Original Notes Tendered" is inadequate, the Certificate number(s) and/or the
principal amount of Original Notes and any other required information should be
listed on a separate signed schedule which is attached to this Letter of
Transmittal.
4. PARTIAL TENDERS AND WITHDRAWAL RIGHTS. If less than all the Original Notes
evidenced by any Certificate submitted are to be tendered, fill in the principal
amount of Original Notes which are to be tendered in the box entitled "Principal
Amount of Original Notes Tendered." In such case, new Certificate(s) for the
remainder of the Original Notes that were evidenced by your old Certificate(s)
will be sent to the holder of the Original Notes, promptly after the Expiration
Date. All Original Notes represented by Certificates delivered to the Exchange
Agent will be deemed to have been tendered unless otherwise indicated.
Except as otherwise provided herein, tenders of Original Notes pursuant to an
Exchange Offer may be withdrawn, unless theretofore accepted for exchange as
provided in the applicable Exchange Offer, at any time prior to the Expiration
Date of that Exchange Offer.
To be effective, a written or facsimile transmission notice of withdrawal must
be received by the Exchange Agent at its address set forth herein prior to the
Expiration Date. Any such notice of withdrawal must (i) specify the name of the
person having deposited the Original Notes to be withdrawn (the "Depositor"),
(ii) identify the Original Notes to be withdrawn (including the Certificate
number or numbers and aggregate principal amount of such Original Notes), and
(iii) be signed by the holder in the same manner as the original signature on
the applicable Letter of Transmittal (including any required signature
guarantees). All questions as to the validity, form and eligibility (including
time of receipt) of such notices will be determined by the Company in its sole
respective discretion, which determination shall be final and binding on all
parties. Any Original Notes so withdrawn will be deemed not to have been validly
tendered for purposes of the Exchange Offer and no
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<PAGE> 12
Exchange Notes will be issued with respect thereto unless the Original Notes so
withdrawn are retendered. Properly withdrawn Original Notes may be retendered by
following one of the procedures described in the Prospectus under "The Exchange
Offer--Procedures for Tendering" at any time prior to the applicable Expiration
Date.
Any Original Notes which have been tendered but which are not accepted for
exchange due to the rejection of the tender due to uncured defects or the prior
termination of the applicable Exchange Offer, or which have been validly
withdrawn, will be returned to the holder thereof (unless otherwise provided in
the Letter of Transmittal), as soon as practicable following the applicable
Expiration Date or, if so requested in the notice of withdrawal, promptly after
receipt by the issuer of the Original Notes of notice of withdrawal without cost
to such holder.
5. SIGNATURES ON LETTER OF TRANSMITTAL, ASSIGNMENTS AND ENDORSEMENTS. If this
Letter of Transmittal is signed by the registered holder(s) of the Original
Notes tendered hereby, the signature(s) must correspond exactly with the name(s)
as written on the face of the Certificate(s) or on a security position listing
without alteration, enlargement or any change whatsoever.
If any of the Original Notes tendered hereby are owned of record by two or more
joint owners, all such owners must sign this Letter of Transmittal.
If any tendered Original Notes are registered in different name(s) on several
Certificates, it will be necessary to complete, sign and submit as many separate
Letters of Transmittal (or facsimiles thereof or Agent's Message in lieu
thereof) as there are different registrations of Certificates.
If this Letter of Transmittal or any Certificates or bond powers are signed by
trustees, executors, administrators, guardians, attorneys-in-fact, officers of
corporations or others acting in a fiduciary or representative capacity, such
persons should so indicate when signing and must submit proper evidence
satisfactory to the Company, in its sole discretion, of such persons' authority
to so act.
When this Letter of Transmittal is signed by the registered owner(s) of the
Original Notes listed and transmitted hereby, no endorsement(s) of
Certificate(s) or separate bond power(s) are required unless Exchange Notes are
to be issued in the name of a person other than the registered holder(s).
Signature(s) on such Certificate(s) or bond power(s) must be guaranteed by an
Eligible Institution.
If this Letter of Transmittal is signed by a person other than the registered
owner(s) of the Original Notes listed, the Certificates must be endorsed or
accompanied by appropriate bond powers, signed exactly as the name or names of
the registered owner(s) appear(s) on the Certificates, and also must be
accompanied by such opinions of counsel, certifications and other information as
the Company may require in accordance with the restrictions on transfer
applicable to the Original Notes. Signatures on such Certificates or bond powers
must be guaranteed by an Eligible Institution.
6. SPECIAL ISSUANCE AND DELIVERY INSTRUCTIONS. If Exchange Notes are to be
issued in the name of a person other than the signer of this Letter of
Transmittal, or if Exchange Notes are to be sent to someone other than the
signer of this Letter of Transmittal or to an address other than that shown
above, the appropriate boxes on this Letter of Transmittal should be completed.
Certificates for Original Notes not exchanged will be returned by mail or, if
tendered by book-entry transfer, by crediting the account indicated above
maintained at DTC. See Instruction 4.
7. IRREGULARITIES. The Company will determine, in its sole discretion, all
questions as to the form of documents, validity, eligibility (including time of
receipt) and acceptance for exchange of any tender of Original Notes
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<PAGE> 13
which determination shall be final and binding on all parties. The Company
reserves the absolute right, in its sole and absolute discretion, to reject any
and all tenders determined by it not to be in proper form or the acceptance of
which, or exchange for, may, in the view of counsel to the Company, be unlawful.
The Company also reserves the absolute right, subject to applicable law, to
waive any of the conditions of the Exchange Offer set forth in the Prospectus
under "The Exchange Offer--Conditions of the Exchange Offer" or any conditions
or irregularity in any tender of Original Notes of any particular holder whether
or not similar conditions or irregularities are waived in the case of other
holders. The Company's interpretation of the terms and conditions of the
Exchange Offer (including this Letter of Transmittal and the instructions
hereto) will be final and binding. No tender of Original Notes will be deemed to
have been validly made until all irregularities with respect to such tender have
been cured or waived. Neither the Company, any affiliates or assigns of the
Company, the Exchange Agent, or any other person shall be under any duty to give
notification of any irregularities in tenders or incur any liability for failure
to give such notification.
8. QUESTIONS, REQUESTS FOR ASSISTANCE AND ADDITIONAL COPIES. Questions and
requests for assistance may be directed to the Exchange Agent at its address and
telephone number set forth on the front of this Letter of Transmittal.
Additional copies of the Prospectus, this Letter of Transmittal and the Notice
of Guaranteed Delivery may be obtained from the Exchange Agent or from your
broker, dealer, commercial bank, trust company or other nominee.
9. 31% BACKUP WITHHOLDING; SUBSTITUTE FORM W-9. Under U.S. Federal income tax
law, a holder whose tendered Original Notes are accepted for exchange is
required to provide the Exchange Agent with such holder's correct taxpayer
identification number ("TIN") on Substitute Form W-9 below. If the Exchange
Agent is not provided with the correct TIN, the Internal Revenue Service (the
"IRS") may subject the holder or other payee to a $50 penalty. In addition,
payments to such holders or other payees with respect to Original Notes
exchanged pursuant to the Exchange Offer may be subject to 31% backup
withholding.
The box in Part 2 of the Substitute Form W-9 may be checked if the tendering
holder has not been issued a TIN and has applied for a TIN or intends to apply
for a TIN in the near future. If the box in Part 2 is checked, the holder or
other payee must also complete the Certificate of Awaiting Taxpayer
Identification Number below in order to avoid backup withholding.
Notwithstanding that the box in Part 2 is checked and the Certificate of
Awaiting Taxpayer Identification Number is completed, the Exchange Agent will
withhold 31% of all payments made prior to the time a properly certified TIN is
provided to the Exchange Agent. The Exchange Agent will retain such amounts
withheld during the 60 day period following the date of the Substitute Form W-
9. If the holder furnishes the Exchange Agent with its TIN within 60 days after
the date of the Substitute Form W-9, the amounts retained during the 60 day
period will be remitted to the holder and no further amounts shall be retained
or withheld from payments made to the holder thereafter. If, however, the holder
has not provided the Exchange Agent with its TIN within such 60 day period,
amounts withheld will be remitted to the IRS as backup withholding. In addition,
31% of all payments made thereafter will be withheld and remitted to the IRS
until a correct TIN is provided.
The holder is required to give the Exchange Agent the TIN (e.g., social security
number or employer identification number) of the registered owner of the
Original Notes or of the last transferee appearing on the transfers attached to,
or endorsed on, the Original Notes. If the Original Notes are registered in more
than one name or are not in the name of the actual owner, consult the enclosed
"Guidelines for Certification of Taxpayer Identification Number on Substitute
Form W-9" for additional guidance on which number to report.
Certain holders (including, among others, corporations, financial institutions
and certain foreign persons) may not be subject to these backup withholding and
reporting requirements. Such holders should nevertheless complete the attached
Substitute Form W-9 below, and write "exempt" on the face thereof, to avoid
possible
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<PAGE> 14
erroneous backup withholding. A foreign person may qualify as an exempt
recipient by submitting a properly completed IRS Form W-8, signed under
penalties of perjury, attesting to that holder's exempt status. Please consult
the enclosed "Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9" for additional guidance on which holders are exempt from
backup withholding.
Backup withholding is not an additional U.S. Federal income tax. Rather, the
U.S. Federal income tax liability of a person subject to backup withholding will
be reduced by the amount of tax withheld. If withholding results in an
overpayment of taxes, a refund may be obtained.
10. LOST, DESTROYED OR STOLEN CERTIFICATES. If any Certificate(s) representing
Original Notes have been lost, destroyed or stolen, the holder should promptly
notify the Exchange Agent. The holder will then be instructed as to the steps
that must be taken in order to replace the Certificate(s). This Letter of
Transmittal and related documents cannot be processed until the procedures for
replacing lost, destroyed or stolen Certificate(s) have been followed.
11. SECURITY TRANSFER TAXES. Holders who tender their Original Notes for
exchange will not be obligated to pay any transfer taxes in connection
therewith. If, however, Exchange Notes are to be delivered to, or are to be
issued in the name of, any person other than the registered holder of the
Original Notes tendered, or if a transfer tax is imposed for any reason other
than the exchange of Original Notes in connection with the Exchange Offer, then
the amount of any such transfer tax (whether imposed on the registered holder or
any other persons) will be payable by the tendering holder. If satisfactory
evidence of payment of such taxes or exemption therefrom is not submitted with
the Letter of Transmittal, the amount of such transfer taxes will be billed
directly to such tendering holder.
IMPORTANT: THIS LETTER OF TRANSMITTAL (OR FACSIMILE THEREOF) AND ALL OTHER
REQUIRED DOCUMENTS MUST BE RECEIVED BY THE EXCHANGE AGENT ON OR PRIOR TO THE
EXPIRATION DATE.
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<PAGE> 15
PAYOR'S NAME: STATE STREET BANK AND TRUST COMPANY, AS EXCHANGE AGENT
PART I--PLEASE PROVIDE YOUR SOCIAL SECURITY OR
TIN IN THE BOX AT RIGHT AND EMPLOYER
CERTIFY BY SIGNING AND IDENTIFICATION NUMBER
DATING BELOW.
SUBSTITUTE
FORM W-9
DEPARTMENT OF THE ____________________
TREASURY INTERNAL (If awaiting TIN
REVENUE SERVICE WRITE "APPLIED FOR")
NAME (PLEASE PRINT)
PAYOR'S REQUEST FOR ------------------------------------------------------------
TAXPAYER IDENTIFICATION ADDRESS
NUMBER ("TIN") AND -------------------------------------------------------------
CERTIFICATION CITY STATE ZIP CODE
PART II--For Payees NOT subject to backup withholding,
see the enclosed Guidelines for Certification of
Taxpayer Identification Number on Substitute Form W-9
and complete as instructed therein.
CERTIFICATION--UNDER PENALTIES OF PERJURY, I CERTIFY
THAT:
1. The number shown on this form is my correct Taxpayer
Identification Number (or I am waiting for a number to
be issued to me),
AND
2. I am not subject to backup withholding because: (a)
I am exempt from backup withholding, or (b) I have not
been notified by the Internal Revenue Service ("IRS")
that I am subject to backup withholding as a result of
a failure to report all interest or dividends, or (c)
the IRS has notified me that I am no longer subject to
backup withholding.
CERTIFICATION INSTRUCTIONS--You must cross out item (2)
above if you have been notified by the IRS that you are
subject to backup withholding because of
under-reporting interest or dividends on your tax
return. However, if after being notified by the IRS
that you were subject to backup withholding you
received another notification from the IRS that you are
no longer subject to backup withholding, do not cross
out item (2).
Signature: __________________ Date: ________ , 1998
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<PAGE> 16
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP
WITHHOLDING OF 31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE EXCHANGE
OFFER. PLEASE REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER
IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS. YOU
MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU WROTE "APPLIED FOR" IN PART
I OF SUBSTITUTE FORM W-9.
PAYOR'S NAME: STATE STREET BANK AND TRUST COMPANY, AS EXCHANGE AGENT
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalties of perjury that a taxpayer identification number
has not been issued to me, and either (a) I have mailed or delivered an
application to receive a taxpayer identification number to the appropriate
Internal Revenue Service Center or Social Security Administration Office or
(b) I intend to mail or deliver an application in the near future. I
understand that if I do not provide a taxpayer identification number within
sixty (60) days, 31% of all reportable payments made to me thereafter will
be withheld until I provide a number.
Signature: _________________________ Date: ________________________, 1998
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<PAGE> 17
APPENDIX A
NEW MEXICO HOLDERS
Any "financial or institutional investor" (as defined below) or broker- dealer.
The term "financial or institutional investor" means any of the following
whether acting for itself or others in a fiduciary capacity other than as an
agent; depository institution (as defined), insurance company, insurance company
separate account, investment company as defined in the Investment Company Act of
1940; an employee pension, profit-sharing or benefit plan (i) if the plan has
total assets in excess of $5,000,000, or (ii) if the investment decisions are
made by a plan fiduciary, as defined in the Employee Retirement Income Security
Act of 1974, which is either a broker-dealer registered under the Securities
Exchange Act of 1934, an investment adviser registered or exempt from
registration under the Investment Advisers Act of 1940, a depository institution
or an insurance company; a business development company as defined in the
Investment Company Act of 1940, a small business investment company licensed by
the United States Small Business Administration under Section 301(c) or 301(d)
of the United States Small Business Investment Act of 1958; or any other
financial or institutional investor as the Director of the New Mexico Securities
Division by rule or order designates. The Director has designated the following
additional "financial or institutional investors:" an entity, other than a
natural person, which is directly engaged in the business of, and derives at
least eighty percent of its annual gross income from, investing, purchasing,
selling or trading in securities of more than one issuer and not of its own
issue, and that has gross assets in excess of five million dollars ($5,000,000)
at the end of its latest fiscal year; an entity organized and operated not for
private profit as described in Section 501(c)(3) of the Internal Revenue Code
with total assets in excess of five million dollars ($5,000,000); a state, a
political subdivision of a state or an agency or corporate or other
instrumentality of a state or a political subdivision of a state; and an
employee pension, profit sharing or benefit plan, if the investment decisions
are made by one or more plan fiduciaries, as defined in the Employee Retirement
Income Security Act of 1974, so long as at least one of such plan fiduciaries is
either a broker-dealer registered under the Securities Exchange Act of 1934, an
investment adviser registered or exempt from registration under the Investment
Advisers Act of 1940, a depository institution, or an insurance company.
PENNSYLVANIA HOLDERS
Any bank as defined, insurance company, pension or profit-sharing plan or trust,
investment company as defined in the Investment Company Act of 1940, other
financial institution or any person, other than an individual, which controls
any of the foregoing, the federal government, the State or any agency or
political subdivision thereof, any other person so designated by regulation of
the Pennsylvania Securities Commission, or any broker-dealer, whether the buyer
is acting for itself or in some fiduciary capacity. Entities so designated by
regulation include: (i) a corporation or business trust or a wholly-owned
subsidiary of the person which has been in existence for 18 months and which has
a tangible net worth on a consolidated basis, as reflected in its most recent
audited financial statements, of $10,000,000 or more; (ii) a college, university
or other public or private institution which has received exempt status under
section 501(c)(3) of the Internal Revenue Code of 1954 and which has total
endowment or trust funds, including annuity and life income funds, of $5,000,000
or more according to its most recent audited financial statements; provided that
the aggregate dollar amount of securities being sold to purchasers in this
category may not exceed 5% of the endowment or trust funds; (iii) a Small
Business Investment Company as that term is defined in section 103 of the Small
Business Investment Act of 1958 which either; (1) has a total capital of
$1,000,000 or more; or (2) is controlled by institutional investors as defined
herein; (iv) a Seed Capital Fund, as defined in section 2 and authorized in
section 6 of the Small Business Incubators Act; (v) a Business Development
Credit Corporation, as authorized by the Business Development Credit Corporation
Law; (vi) a person whose securityholders consist solely of institutional
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<PAGE> 18
investors as defined herein or broker-dealers; or (vii) a qualified
institutional buyer as that term is defined in 17 CFR 230.144A (relating to
private resales of securities to institutions), or any successor rule thereto.
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<PAGE> 1
EXHIBIT 99.2
NOTICE OF GUARANTEED DELIVERY
FOR TENDER OF
10 1/4% SENIOR SUBORDINATED NOTES
DUE JULY 1, 2008
OF
SIMONDS INDUSTRIES INC.
This Notice of Guaranteed Delivery, or one substantially equivalent to this
form, must be used to accept the Exchange Offer (as defined below) if (i) the
procedures for delivery by book-entry transfer cannot be completed on a timely
basis (ii) certificates for the Company's (as defined below) 10 1/4% Senior
Subordinated Notes due July 1, 2008 (the "Original Notes") are not immediately
available or (iii) Original Notes, the Letter of Transmittal and all other
required documents cannot be delivered to State Street Bank and Trust Company
(the "Exchange Agent") on or prior to the Expiration Date (as defined in the
Prospectus referred to below). This Notice of Guaranteed Delivery may be
delivered by hand, overnight courier or mail, or transmitted by facsimile
transmission, to the Exchange Agent. See "The Exchange Offer--Procedures for
Tendering" in the Prospectus.
The Exchange Agent for the Exchange Offer is:
STATE STREET BANK AND TRUST COMPANY
By Registered or Certified Mail or Hand or Overnight Delivery:
State Street Bank and Trust Company
Two International Place
Fourth Floor
Boston, MA 02110
Attention: Corporate Trust Department
Facsimile Transmissions:
(Eligible Institutions Only)
[ ]
DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY TO AN ADDRESS OTHER THAN AS SET
FORTH ABOVE OR TRANSMISSION OF THIS NOTICE OF GUARANTEED DELIVERY VIA FACSIMILE
TO A NUMBER OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY.
THIS NOTICE OF GUARANTEED DELIVERY IS NOT TO BE USED TO GUARANTEE SIGNATURES. IF
A SIGNATURE ON A LETTER OF TRANSMITTAL IS REQUIRED TO BE GUARANTEED BY AN
"ELIGIBLE INSTITUTION" UNDER THE INSTRUCTIONS THERETO, SUCH SIGNATURE GUARANTEE
MUST APPEAR IN THE APPLICABLE SPACE PROVIDED IN THE SIGNATURE BOX ON THE LETTER
OF TRANSMITTAL.
THE GUARANTEE ON THE REVERSE SIDE MUST BE COMPLETED.
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Ladies and Gentlemen:
The undersigned hereby tenders to Simonds Industries Inc., a Delaware
corporation (the "Company"), upon the terms and subject to the conditions set
forth in the Prospectus dated , 1998 (as the same may be amended or supplemented
from time to time, the "Prospectus"), and the related Letter of Transmittal
(which together constitute the "Exchange Offer"), receipt of which is hereby
acknowledged, the aggregate liquidation amount of Original Notes set forth below
pursuant to the guaranteed delivery procedures set forth in the Prospectus under
the caption "The Exchange Offer--Procedures for Tendering."
Aggregate Principal Amount Tendered:
(NAME(S) OR REGISTERED HOLDER(S)--
PLEASE PRINT)
CERTIFICATE NOS. (IF AVAILABLE)
(ADDRESS OF REGISTERED HOLDER(S))
Check box if Original Notes will be _________________________________________
delivered by book-entry transfer and ________________________________________
provide account number. (ZIP CODE)
[_] The Depository Trust Company ____________________________________________
(AREA CODE AND TELEPHONE NO.)
DTC ACCOUNT NUMBER: _________________________________________________________
Date: _______________________________ (NAME(S) OF AUTHORIZED SIGNATORY)
____________________________________________
(CAPACITY)
____________________________________________
(ADDRESS(ES) OF AUTHORIZED
SIGNATORY)
____________________________________________
(AREA CODE AND TELEPHONE NO.)
____________________________________________
(SIGNATURE(S) OF RECORD HOLDER OR
AUTHORIZED SIGNATORY)
DATED: _____________________________________
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GUARANTEE OF DELIVERY
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
The undersigned, a firm or other entity identified in Rule 17Ad-15 under the
Securities Exchange Act of 1934, as amended, as an "eligible guarantor
institution," including (as such terms are defined therein): (1) a bank; (2) a
broker, dealer, municipal securities broker, municipal securities dealer,
government securities broker, government securities dealer; (3) a credit union;
(4) a national securities exchange, registered securities association or
clearing agency; or (5) a savings association that is a participant in a
Securities Transfer Association recognized program (each of the foregoing being
referred to as an "Eligible Institution"), hereby guarantees to deliver to the
Exchange Agent at one of its addresses set forth above, either the Original
Notes tendered hereby in proper form for transfer, or confirmation of the
book-entry transfer of such Original Notes to the Exchange Agent's account at
The Depository Trust Company ("DTC"), pursuant to the procedures for book- entry
transfer set forth in the Prospectus, in either case together with one or more
properly completed and duly executed Letter(s) of Transmittal (or facsimile
thereof or Agent's Message in lieu thereof) and any other required documents
within three business days after the date of execution of this Notice of
Guaranteed Delivery. The undersigned acknowledges that it must deliver the
Letter(s) of Transmittal (or facsimile thereof or Agent's Message in lieu
thereof) and the Original Notes tendered hereby to the Exchange Agent within the
time period set forth above and that failure to do so could result in a
financial loss to the undersigned.
____________________________________________
(NAME OF FIRM)
____________________________________________
(AUTHORIZED SIGNATURE)
____________________________________________
(TITLE)
____________________________________________
(ADDRESS)
____________________________________________
(ZIP CODE)
____________________________________________
(AREA CODE AND TELEPHONE NUMBER)
DATED: _________________
NOTE: DO NOT SEND ORIGINAL NOTES WITH THIS NOTICE OF GUARANTEED DELIVERY.
ACTUAL SURRENDER OF ORIGINAL NOTES MUST BE MADE PURSUANT TO, AND BE
ACCOMPANIED BY, A PROPERLY COMPLETED AND DULY EXECUTED LETTER OF
TRANSMITTAL AND ANY OTHER REQUIRED DOCUMENTS.
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EXHIBIT 99.3
SIMONDS INDUSTRIES INC.
135 Intervale Road
Fitchburg, MA 01420
EXCHANGE AGENT AGREEMENT
_________, 1998
State Street Bank and Trust Company
Two International Place, 4th Floor
Boston, MA 02110
Ladies and Gentlemen:
Simonds Industries Inc., a Delaware corporation (the "Company") proposes to make
an offer (the "Exchange Offer") to exchange up to $100,000,000 aggregate
principal amount of its 10 1/4% Senior Subordinated Notes due July 1, 2008 (the
"Exchange Notes"), which have been registered under the Securities Act of 1933,
as amended (the "Securities Act"), for a like principal amount of its
outstanding 10 1/4% Senior Subordinated Notes due July 1, 2008 which have not
been so registered (the "Original Notes"), of which $100,000,000 aggregate
principal amount is outstanding. The terms and conditions of the Exchange Offer
as currently contemplated are set forth in a prospectus, expected to be dated
September __, 1998 (the "Prospectus"), a copy of which is attached to this
Agreement as Attachment A, proposed to be distributed to all record holders of
the Original Notes. Capitalized terms used herein and not otherwise defined
shall have the meaning assigned to them in the Prospectus.
The Company hereby appoints State Street Bank and Trust Company to act as
exchange agent (the "Exchange Agent") in connection with the Exchange Offer.
References hereinafter to "you" shall refer to State Street Bank and Trust
Company.
The Exchange Offer is expected to be commenced by the Company on or about
________, 1998. The Letter of Transmittal accompanying the Prospectus is to be
used by the holders of the Original Notes to accept the Exchange Offer, and
contains instructions with respect to the Exchange Offer.
The Exchange Offer shall expire at 5:00 p.m., New York City time, on ________,
1998 unless extended (as so extended the "Expiration Date"). Subject to the
terms and conditions set forth in the Prospectus, the Company expressly reserves
the right to extend the Exchange Offer from time to time and may extend the
Exchange Offer by giving oral (promptly confirmed in writing) or written notice
to you no later than 9:00 a.m., New York City time, on the next business day
after the previously scheduled Expiration Date.
The Company expressly reserves the right to amend or terminate the Exchange
Offer, and not to accept for exchange any Original Notes not theretofore
accepted for exchange, upon the occurrence of any of the conditions of the
Exchange Offer specified in the Prospectus under the caption "The Exchange
Offer-Conditions of the Exchange Offer." The Company will give oral (promptly
confirmed in writing) or written notice of any amendment, termination or
nonacceptance to you as promptly as practicable.
In carrying out your duties as Exchange Agent, you are to act in accordance with
the following instructions:
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1. You will perform such duties and only such duties as are specifically set
forth in the section of the Prospectus captioned "The Exchange Offer," as
specifically set forth herein and such duties which are necessarily incidental
thereto; provided, however, that in no way will your general duty to act in good
faith be discharged by the foregoing.
2. You will establish an account with respect to the Original Notes at The
Depository Trust Company (the "Book-Entry Transfer Facility") for purposes of
the Exchange Offer within two business days after the date of the Prospectus or,
if you already have established an account with the Book-Entry Transfer Facility
suitable for the Exchange Offer, you will identify such pre-existing account to
be used in the Exchange Offer, and any financial institution that is a
participant in the Book-Entry Transfer Facility's systems may make book-entry
delivery of the Original Notes by causing the Book-Entry Transfer Facility to
transfer such Original Notes into your account in accordance with the Book-Entry
Transfer Facility's procedure for such transfer.
3. You are to examine each of the Letters of Transmittal, certificates for the
Original Notes and confirmations of book-entry transfers into your account at
the Book-Entry Transfer Facility and any Agent's Message or other documents
delivered or mailed to you by or for holders of the Original Notes to ascertain
whether: (i) the Letters of Transmittal and any such other documents are duly
executed and properly completed in accordance with instructions set forth
therein and (ii) the Original Notes have otherwise been properly tendered. In
each case where the Letter of Transmittal or any other document has been
improperly completed or executed or any of the certificates for Original Notes
are not in proper form for transfer or some other irregularity in connection
with the acceptance of the Exchange Offer exists, you will endeavor to inform
the presenters of the need for fulfillment of all requirements and to take any
other action as may be necessary or advisable to cause such irregularity to be
corrected.
4. With the approval of the Chief Executive Officer or the Chief Financial
Officer of the Company (such approval, if given orally, to be confirmed in
writing), you are authorized to waive any irregularities in connection with any
tender of Original Notes pursuant to the Exchange Offer.
5. Tenders of Original Notes may be made only as set forth in the section of the
Prospectus captioned "The Exchange Offer--Procedures for Tendering" or in the
Letter of Transmittal, and Original Notes shall be considered properly tendered
to you only when tendered in accordance with the procedures set forth therein.
Notwithstanding the provisions of this paragraph 5, Original Notes which the
Company or any other party designated by the Company in writing shall approve as
having been properly tendered shall be considered to be properly tendered (such
approval, if given orally, shall be confirmed in writing).
6. You shall advise the Company with respect to any Original Notes delivered
subsequent to the Expiration Date and accept its written instructions with
respect to the disposition of such Original Notes.
7. You shall accept tenders:
(a) in cases where the Original Notes are registered in two or more names
only if signed by all named holders;
(b) in cases where the signing person (as indicated on the Letter of
Transmittal) is acting in a fiduciary or a representative capacity only
when proper evidence of his or her authority to so act is submitted; and
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(c) from persons other than the registered holder of Original Notes
provided that customary transfer requirements, including any applicable
transfer taxes, are fulfilled.
You shall accept partial tenders of Original Notes where so indicated and as
permitted in the Letter of Transmittal and deliver certificates for Original
Notes to the transfer agent for split-up and return any untendered Original
Notes to the holder (or to such other person as may be designated in the Letter
of Transmittal) as promptly as practicable after expiration or termination of
the Exchange Offer.
8. Upon satisfaction or waiver of all of the conditions to the Exchange Offer,
the Company will notify you (such notice if given orally, to be promptly
confirmed in writing) of the Company's acceptance, promptly after the Expiration
Date, of all Original Notes properly tendered and you, on behalf of the Company,
will exchange such Original Notes for Exchange Notes and cause such Original
Notes to be canceled. Delivery of Exchange Notes will be made on behalf of the
Company by you at the rate of $1,000 principal amount of Exchange Notes for each
$1,000 principal amount of Original Notes tendered promptly after notice (such
notice if given orally, to be promptly confirmed in writing) of acceptance of
said Original Notes by the Company; provided, however, that in all cases,
Original Notes tendered pursuant to the Exchange Offer will be exchanged only
after timely receipt by you of certificates for such Original Notes (or
confirmation of book- entry transfer into you account at the Book-Entry Transfer
Facility), a properly completed and duly executed Letter of Transmittal (or
facsimile thereof) with any required signature guarantees (or Agent's Message in
lieu thereof) and any other required document. You shall issue Exchange Notes
only in denominations of $1,000 or any integral multiple thereof.
9. Tenders pursuant to the Exchange Offer are irrevocable, except that, subject
to the terms and upon the conditions set forth in the Prospectus and the Letter
of Transmittal, Original Notes tendered pursuant to the Exchange Offer may be
withdrawn at any time on or prior to the Expiration Date.
10. The Company shall not be required to exchange any Original Notes tendered if
any of the conditions set forth in the Exchange Offer are not met. Notice of any
decision by the Company not to exchange any Original Notes tendered shall be
given (such notice, if given orally, shall be promptly confirmed in writing) by
the Company to you.
11. If, pursuant to the Exchange Offer, the Company does not accept for exchange
all or part of the Original Notes tendered because of an invalid tender, the
occurrence of certain other events set forth in the Prospectus under the caption
"The Exchange Offer--Conditions of the Exchange Offer" or otherwise, you shall
as soon as practicable after the expiration or termination of the Exchange Offer
return those certificates for unaccepted Original Notes (or effect the
appropriate book-entry transfer of the unaccepted Original Notes), and return
any related required documents and the Letters of Transmittal relating thereto
that are in your possession, to the persons who deposited them.
12. All certificates for reissued Original Notes or for unaccepted Original
Notes shall be forwarded by (a) first-class mail, return receipt requested,
under a blanket surety bond protecting you and the Company from loss or
liability arising out of the non-receipt or non-delivery of such certificates or
(b) by registered mail insured separately for the replacement value of such
certificates.
13. You are not authorized to pay or offer to pay any concessions, commissions
or solicitation fees to any broker, dealer, bank or other persons or to engage
or utilize any person to solicit tenders.
14. As Exchange Agent hereunder you:
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(a) will be regarded as making no representations and having no
responsibilities as to the validity, sufficiency, value or genuineness of
Original Notes, and will not be required to and will make no representation
as to the validity, value or genuineness of the Exchange Offer; provided,
however, that in no way will your general duty to act in good faith be
discharged by the foregoing;
(b) shall not be obligated to take any legal action hereunder which might
in your reasonable judgment involve any expense or liability, unless you
shall have been furnished with reasonable indemnity satisfactory to you;
(c) shall not be liable to the Company for any action taken or omitted by
you, or any action suffered by you to be taken or omitted, without gross
negligence, willful misconduct or bad faith on your part, by reason of or
as a result of the administration of your duties hereunder in accordance
with the terms and conditions of this Agreement or by reason of your
compliance with the instructions set forth herein or with any written or
oral instructions delivered to you pursuant hereto, and may conclusively
rely on and shall be fully protected in acting or refraining from acting in
good faith in reliance upon any certificate, instrument, opinion, notice,
letter, facsimile or other document or security delivered to you and
reasonably believed by you to be genuine and to have been signed by the
proper party or parties;
(d) may reasonably act upon any tender, statement, request, comment,
agreement or other instrument whatsoever not only as to its due execution
and validity and the effectiveness of its provisions, but also as to the
truth and accuracy of any information contained therein (without any
investigation thereto), which you shall in good faith reasonably believe to
be genuine or to have been signed or represented by a proper person or
persons;
(e) may conclusively rely on and shall be fully protected in acting upon
written or oral instructions from any officer of the Company with respect
to the Exchange Offer and shall not be liable for acting or refraining from
acting in accordance with any oral instructions which are inconsistent with
the written confirmation provided in connection therewith;
(f) shall not advise any person tendering Original Notes pursuant to the
Exchange Offer as to the wisdom of making such tender or as to the market
value or decline or appreciation in market value of any Original Notes; and
(g) may consult with your counsel with respect to any questions relating to
your duties and responsibilities and the written opinion of such counsel
shall be full and complete authorization and protection in respect of any
action taken, suffered or omitted by you hereunder in good faith and in
accordance with such advice or written opinion of such counsel.
15. You shall take such action as may from time to time be requested by the
Company or its counsel (and such other action as you may reasonably deem
appropriate) to furnish, at the Company's expense, copies of the Prospectus,
Letter of Transmittal and the Notice of Guaranteed Delivery, or such other forms
as may be approved from time to time by the Company, to all persons requesting
such documents and to accept and comply with telephone requests for information
relating to the Exchange Offer, provided that such information shall relate only
to the procedures for accepting (or withdrawing from) the Exchange Offer. The
Company will furnish you with copies of such documents at your request. All
other requests for information relating to the Exchange Offer shall be directed
to the Secretary of the Company at: 135 Intervale Road, Fitchburg, MA 01420.
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16. You shall advise by facsimile transmission or telephone, and promptly
thereafter confirm in writing to the Company and Edwards & Angell, LLP, counsel
for the Company, and such other person or persons as they may request, weekly,
and more frequently, if reasonably requested, up to and including the Expiration
Date, as to the principal amount of the Original Notes which have been tendered
pursuant to the Exchange Offer and the items received by you pursuant to this
Agreement, separately reporting and giving cumulative totals of the items
properly received, items improperly received and items covered by Notices of
Guaranteed delivery. You shall also provide the Company or any such other person
or persons as the Company may request from time to time prior to the Expiration
Date with such other information as the Company or such other person may
reasonably request. In addition, you shall grant to the Company and such persons
as the Company may request, access to those persons on your staff who are
responsible for receiving tenders, in order to ensure that immediately prior to
the Expiration Date, the Company shall have received information in sufficient
detail to enable them to decide whether to extend the Exchange Offer. You shall
prepare a list of holders who failed to tender or whose tenders were not
accepted and the aggregate principal amount of Original Notes not tendered or
not accepted and deliver said list to the Company at least seven days prior to
the Expiration Date. You shall also prepare a final list of all persons whose
tenders were accepted, the aggregate principal amount of Original Notes tendered
and the aggregate principal amount of Original Notes accepted and deliver said
list to the Company.
17. Letters of Transmittal and Notices of Guaranteed Delivery shall be stamped
by you as to the date and the time of receipt thereof and shall be preserved by
you for a period of time at least equal to the period of time you preserve other
records pertaining to the transfer of securities. You shall dispose of unused
Letters of Transmittal and other surplus materials by returning them to the
Company.
18. For services rendered as Exchange Agent hereunder you shall be entitled to a
fee from the Company of $5,000 and you shall be entitled to reimbursement of
your expenses (including fees and expenses of your counsel, which fees are
expected under normal circumstances to be not in excess of $5,000) incurred in
connection with the Exchange Offer. The provisions of this section 18 shall
survive the termination of this Agreement.
19. You hereby acknowledge receipt of the Prospectus and the Letter of
Transmittal attached hereto and further acknowledge that you have examined each
of them to the extent necessary to perform your obligations hereunder. Any
inconsistency between this Agreement, on the one hand, and the Prospectus and
the Letter of Transmittal (as they may be amended from time to time), on the
other hand, shall be resolved in favor of the latter two documents, except with
respect to the duties, liabilities and indemnification of you as Exchange Agent,
which shall be controlled by this Agreement.
20. The Company agrees to indemnify and hold you (and your officers, directors,
employees and agents) harmless in your capacity as Exchange Agent hereunder
against any liability, cost or expense, including reasonable attorney's fees,
arising out of or in connection with the acceptance or administration of your
duties hereunder, including, without limitation, in connection with any act,
omission, delay or refusal made by you in reasonable reliance upon any
signature, enforcement, assignment, certificate, order, request, notice,
instruction or other instrument or document reasonably believed by you to be
valid, genuine and sufficient and in accepting any tender or effecting any
transfer of Original Notes reasonably believed by you in good faith to be
authorized, and in delaying or refusing in good faith to accept any tenders or
effect any transfer of Original Notes; provided, however, that the Company shall
not be liable for indemnification or otherwise for any loss, liability, cost or
expense to the extent arising out of your gross negligence, willful misconduct
or bad faith. You shall notify the Company by letter or cable or by facsimile
confirmed by letter, of the written assertion of a claim against you or of any
other action commenced against you, promptly after you shall have received any
such written assertion or commencement of action; however, failure to provide
such notification shall not constitute a waiver of any rights afforded the
Exchange Agent under this section. The Company shall be entitled to participate
at its own
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expense in the defense of any such claim or other action. You shall not
compromise or settle any such action or claim without the consent of the
Company. The provisions of this section 20 shall survive the termination of this
Agreement.
21. This Agreement and your appointment as Exchange Agent hereunder shall be
construed and enforced in accordance with the laws of the State of New York
applicable to agreements made and to be performed entirely within such state,
without regard to conflicts of law principles, and shall inure to the benefit
of, and the obligations created hereby shall be binding upon, the successors and
assigns of each of the parties hereto.
22. This Agreement may be executed in two or more counterparts, each of which
shall be deemed to be an original and all of which taken together constitute one
and the same agreement.
23. In case any provision of this Agreement shall be invalid, illegal or
unenforceable, the validity, legality and enforceability of the remaining
provisions shall not in any way be affected or impaired thereby.
24. This Agreement shall not be deemed or construed to be modified, amended,
rescinded, canceled or waived, in whole or in part, except by a written
instrument signed by a duly authorized representative of the party to be
charged. This Agreement may not be modified orally.
25. Unless otherwise provided herein, all notices, requests and other
communications to any party hereunder shall be in writing (including facsimile)
and shall be given to such party, addressed to it, at its address or telecopy
number set forth below:
If to the Company, to:
Simonds Industries Inc., 135 Interval Road, Fitchburg, MA 01420 Attention:
Joseph Sylvia Facsimile: (978) 343-3489
with a copy to:
Edwards & Angell, LLP, 150 John F. Kennedy Parkway, Short Hills, NJ 07078
Attention: Christine M. Marx, Esq. Facsimile: (973) 376-3380
If to the Exchange Agent, to:
State Street Bank and Trust Company, Two International Place, 4th Floor,
Boston, MA 02110 Attention: Robert Dunn Facsimile: (617) [ ]
26. Unless terminated earlier by the parties hereto, this Agreement shall
terminate 90 days following the Expiration Date. Notwithstanding the foregoing,
Paragraphs 18 and 20 shall survive the termination of this Agreement. Except as
provided in Paragraph 17, upon any termination of this Agreement, you shall
promptly deliver to the Company any funds or property (including, without
limitation, Letters of Transmittal and any other documents relating to the
Exchange Offer) then held by you as Exchange Agent under this Agreement.
27. This Agreement shall be binding and effective as of the date hereof.
Please acknowledge receipt of this Agreement and confirm the arrangements herein
provided by signing and returning the enclosed copy.
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SIMONDS INDUSTRIES INC.
By: ________________________________
Name: ______________________________
Title: _____________________________
Accepted as of the date
first above written:
STATE STREET BANK AND TRUST COMPANY
as Exchange Agent
By: _________________________________
Name: ________________________________
Title: _______________________________
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